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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › YTM (yield to maturity)
Hi, there is a confusion relating to the formula of interpolation in YTM bond valuation, which is
[ LDR+{NPV at LDR-MP / NPV at LDR-NPV at HDR} ×(HDR-LDR) ]
As in ytm bond valuation it says we are actually caculating the IRR at which the present value of the future interest payments and the redemption value of the bond at maturity are equal to the market value of the bond
BUT… as the formula of interpolation for IRR calculation which i studied in project appriasal section is ….[LDR +{NPV at LDR / NPV at LDR -NPV at HDR} ×(HDR-LDR)]
*** LDR= lower discount rate , HDR= higher discount rate , MP=market price
is it not the same formula we would use ??? why the inclusion of MP in the formula
Hi,
I think you’ve posted in the wrong forum. I think this should be in the FM forum.
Thanks