10.13: Video Activity

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Using TI BA II+ to Price a Bond

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If you are provided with annual information in a bond problem, which bond variables must be adjusted to accommodate semiannual compounding periods, and how must they be adjusted? Review the video to follow along as this information is provided.

Following the instructions laid out in the video, practice using a calculator to find the price of a bond under two scenarios. The first scenario should be when compounding periods are annual, or once a year, and the second scenario should be when compounding periods are semiannual, or once every six months.

Start out this exercise with the bond factor input variables that are used in the video: par value of $1,000, annual coupon rate of 4%, time to maturity of 10 years, and yield to maturity of 8%. Calculate the current value or price of the bond under both of the different compounding period scenarios.

Once you have arrived at the same results demonstrated in the video, practice calculating prices using different bond factor variables for inputs, changing time or years to maturity, coupon rate (and coupon payments), and yield to maturity until you are completely confident using a financial calculator to find the price or value of any bond.

Bond Pricing, Valuation, Formulas, and Functions in Excel

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Review the examples included in this video, and practice setting up spreadsheets that solve for each of the five primary bond variables using the values in the videos (maturity 10 years, coupon rate 10%, coupon payment $100, yield to maturity 8%, and par value $1,000). Parallel the spreadsheets that are set up in the video, ensuring that you arrive at the same results for each bond variable amount.

Name and describe the five primary bond variables that can be solved using Excel spreadsheets.

What are the Excel functions that allow you to perform these calculations, and where in the standard Excel spreadsheet are they located?