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Finance[yieldtomaturity] - yield to maturity of a level coupon bond
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Calling Sequence
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yieldtomaturity(amount, face, couponrate, maturity)
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Parameters
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amount
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present value of the bond
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face
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face value of the bond
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couponrate
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rate indicated by the bond
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maturity
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number of periods to maturity
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Description
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The function yieldtomaturity the interest rate ``rate'' of a bond with face value ``face'', present value ``amount'', maturing in ``maturity'' period and paying at a rate ``couponrate'' per period.
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The coupon rate is the rate that determines the payments that the bond gives.
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This function is closely related to the levelcoupon function.
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The command with(Finance,yieldtomaturity) allows the use of the abbreviated form of this command.
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Since yieldtomaturity used to be part of the (now deprecated) finance package, for compatibility with older worksheets, this command can also be called using finance[yieldtomaturity]. However, it is recommended that you use the superseding package name, Finance, instead: Finance[yieldtomaturity].
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Compatibility
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The Finance[yieldtomaturity] command was introduced in Maple 15.
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Examples
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Compare these examples with those in Finance[levelcoupon] I hold a bond with face value of 1000 U with an annual coupon rate of 12%. The coupon is paid twice yearly. The maturity is in 3 years. What is the yield to maturity of the bond, compounded semi-annually given that its present value is 1050.75 U
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There are 6 periods of half a year until maturity.
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Yield is 5% per half year, therefore it is
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10% per year. If the present value is the same as the face value
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In other words, the yield is identical to the coupon rate when the bond is valued at par. (Remember that the extra factor of 2 is to convert the semi-annual yield to annual yield).
Now let the present value decline to less than face.
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This example shows that the yield must increase when the value of the bond declines.
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