Bond Function of Texas Instrunents BA II Professional Calculator - YouTube

Hi there, this is Utkarsh Jain

and the purpose of this video presentation

is to understand the bond function of Texas Instruments BA II Plus Professional Calculator

If you're a CFA or FRM Exam candidate

this function is a real life saver on the day of the exam!

let's look at a hypothetical problem to understand how to use this function

Let us say we have a bond which has a settlement date of 16 June , 2014

Coupon Rate 5%

Coupon Payment frequency- Semiannual

We have the Interest Payment Dates

We have Maturity Date

Day count convention is 30/360

Annual YTM is 5%

We have been asked to calculate Flat price,

Accrued Interest and Full Price of the bond

also, modified duration of the bond

let us see how bond function of Texas Instruments BA II Plus professional Calculator can help us solve this kind of problem

The first thing you can do is to go to second and format

I have set my decimals as nine

press downward arrow and it will bring you to the date convention

now, by saying second set you can change the convention of the dates

European convention should be DD.MMYY

US convention will be MM.DDYY

I generally prefer to work on the European Style Dates

Therefore, I am going to set it as European

Second Quit to Exit

Then say Second and Nine to Enter the Bond Function

Second Clr Work to Delete if there was anything saved

First parameter we have to insert is SDT which is the settlement date

Settlement date means the date of which is the bond is to be valued

In our example it is 16th June 2014

Since we have set our calculator on European Style Date Function

I am going to sate date which is 16

dot 06 which is month 14 which is year

and then Enter so that we have been able to enter the settlement date

Once you have done that press downward arrow and it will ask you what is the coupon rate

Even though frequency is semi-annual, we have to use the annual date without using the % button

simply say 5 enter

downward arrow

now it is asking us the redemption date

i.e. the date on which the bond will mature

and we have than date to be 10th Ocober 2017

So 10 whic is the date

dot

1017

enter

so we now have the redemption date

press downward arrow and it is asking us the redemption value

which in this case is simply 100

if the bond is callable and maybe callable at 101, then redemption value will be 101

but in other cases, just let it remain as 100

downward arrow and it is asking us what are the conventions used

is it actual/actual or is it 30/360?

in our example it is 30/360

say second and set to change the convention of the dates

then press downward arrow

it will ask you whether the payments are made annual or semiannual

if I Press Second Set it will show 1/y which means annual coupons

second set again and then it gives us semi-annual coupon

downward arrow

it is asking us what is the anulaised yield to maturity

simply say 5 enter

then press donward arrow again and it will ask us the price

say compute and price will be 99.99

this price given by the calculator is the clean price or flat price of the bond

so I am going to save it in the first memory slot

press downward arrow again

it will give you the accrued interest which is 0.91

Store that in the second memory slot

we know that Clean Price + Accrued interest is the full price of the bond

which in this case will be 100.90

if you press downward arrow one more time

it will also calculate duration of the bond

which is 3.02

this is utkarsh jain

thank you for watching the video!