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HP 12c Platinum Financial Calculator  Bonds
Bonds
It is not unusual that either companies or governments themselves need extra funds to expand into new markets or raise
funds to pay for programs. In these cases, they typically need large quantities of money that the average bank cannot
provide. Raising money by issuing bonds to a public market is one solution.
By purchasing bonds, an investor becomes a creditor to the corporation or government. Many investors have at least
part of their portfolio invested in bonds. The issuer of a bond must pay the investor a "fee" (interest payments) for the
privilege of using his or her money. The interest rate is often referred to as the coupon, and the date on which the issuer
has to repay the amount borrowed (face value) is called the maturity date. The total return an investor receives if the
bond is held to maturity is equal to all the interest payments received plus any gain or loss. This is called the yield to
maturity, or YTM.
Bonds in the HP 12c Platinum
The HP 12c Platinum uses the following expression to compute a semiannual coupon with six months or less to maturity:
Figure : Method for calculating a semiannual coupon
The HP 12c Platinum uses the following expression to compute a semiannual coupon with more than six months to
maturity (don't worry  there is no need to understand the particulars of this long equation to work with bonds on the HP
12c Platinum):
Figure : Method for calculating a semiannual coupon for more than six months
where:
Term

Description

DIM

Days between issue and maturity date

DSM

Days between settlement date and maturity date

DCS

Days between beginning of coupon period and settlement date

E

Number of days in coupon period where settlement occurs

DSC = E  DCS

Days from settlement days to next 6month coupon date

N

Number of semiannual coupons payable between settlement date and maturity date

CPN

Annual coupon rate (percentage)

YIELD

Annual yield (percentage)

PRICE

Dollar price per $100 par value

RDV

Redemption value

The HP 12c Platinum allows either the YTM or bond price to be calculated, provided one of the two is known. The TVM
registers , and are used to hold the necessary data, as shown below:
Register

Contents


Annual coupon rate (percentage)


Quoted price (percent of par)


Yield to maturity

Then enter settlement date and maturity date separated by and press to calculate yield to maturity or
to calculate both bond price and the amount of accrued interest. If price is calculated, the display shows the
bond price and the amount of accrued interest can be brought to the display by pressing and/or the net price can
be calculated by pressing in RPN mode or by pressing in algebraic mode. Dates must be entered according to current date mode.
Practice calculating with bonds
Example 1
What price should be paid on August 10, 2003 for a 6^{3}/_{4}% U.S. Treasury bond that matures on May 1, 2018
considering a yield of 8^{3}/_{8}%? The coupon payments are semiannual. (The example assumes
MM.DDYYYY date format.)
Solution
To make sure there is no residual value from previous calculations, clear the TVM registers contents to
zero and set MDY mode prior to start the calculation:
Now enter the initial data:
Keystroke (In RPN mode)

Keystroke (In algebraic mode)



Enter the settlement and maturity dates and compute the bond price:
Keystroke

Display


Figure : Displaying the bond price

To verify the amount of accrued interest and then calculate the net price:
Keystroke

Display


Figure : Displaying the accrued interest

Keystroke (In RPN mode)

Keystroke (In algebraic mode)

Display



Figure : Calculating the net price paid

Answer
The net price paid for the 6^{3}/_{4}% U.S. Treasury bond on August 10, 2003 should be $88.23 per $100.
Example 2
Keeping previous example data, suppose that the actual market quote for the bond is 8^{1}/_{4}% instead of
8^{3}/_{8}%. What yield does it represent now?
Solution
Simply update the quote price in , enter the settlement and maturity dates and press :
Keystroke

Display


Figure : Calculating the yield to maturity

Answer
The yield for the 6^{3}/_{4}% U.S. Treasury bond now quoted at $88.25 per $100 is 8.13%.
Example 3
Consider a zerocoupon, semiannual bond purchased on May 19, 2003 that matures on June 30, 2017.
What is the price given a yield to maturity of 14%? Use D.MY date mode this time.
Solution
To make sure there is no residual value from previous calculations, clear the TVM registers contents to
zero ( is automatically set to zero) and set D.MY mode prior to calculate the price.
Keystroke

Display


Figure : Calculating the price for a zerocoupon bond

Answer
The price for the zerocoupon bond in the example is $14.81 per $100.
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