Yield calculation

Question 1

. Running yield for bond trading at £120, coupon 4% per £100 nominal

Answer 1

Calculation is Coupon / Clean Price x 100
Coupon is £4 (4% of each £100 nominal)
Calculation is therefore 4 / 120 x 100 or 3.33%

Question 2

Running yield for bond trading at £190, coupon 3.3% per £100 nominal

Answer 2

Calculation is Coupon / Clean Price x 100
Coupon is £3.30 (3.3% of each £100 nominal)
Calculation is therefore 3.3 / 190 x 100 or 1.74%

Question 3

Running yield for bond trading at £75, coupon 3% per £100 nominal

Answer 3

Calculation is Coupon / Clean Price x 100
Coupon is £3 (3% of each £100 nominal)
Calculation is therefore 3 / 75 x 100 or 4%

Question 4

Running yield for bond trading at £67, coupon 6% per £100 nominal

Answer 4

Calculation is Coupon / Clean Price x 100
Coupon is £6 (6% of each £100 nominal)
Calculation is therefore 6 / 67 x 100 or 8.96%

Question 5

Running yield for bond trading at £152, coupon 2.45% per £100 nominal

Answer 5

Calculation is Coupon / Clean Price x 100
Coupon is £2.45 (2.45% of each £100 nominal)
Calculation is therefore 2.45 / 152 x 100 or 1.61%

Question 6

Redemption yield for bond with running yield of 2.45%, trading at £90 with a
£100 redemption in 7 years

Answer 6

Calculation is: Running yield +/– (((gain or (loss) to maturity / number of years to maturity) / clean price) x 100)
Running yield is 2.45%, gain to maturity is £10, number of years to maturity is 7,
clean price is £90
2.45% + (((10/7)/90) x 100)
2.45% + ((0.0159) x 100)
2.45% + 1.59% = 4.04%

Question 7

Redemption yield for bond with running yield of 5%, trading at £125 with a
£100 redemption in 11 years

Answer 7

Calculation is: Running yield +/– (((gain or (loss) to maturity / number of years to
maturity) / clean price) x 100)
Running yield is 5%, loss to maturity is £25, number of years to maturity is 11, clean
price is £125
5% - (((25/11)/125) x 100)
5% - ((0.018) x 100)
5% - 1.8% = 3.2%

Question 8

Redemption yield for bond with running yield of 1.5%, trading at £42 with a
£100 redemption in 17 years

Answer 8

Calculation is: Running yield +/– (((gain or (loss) to maturity / number of years to
maturity) / clean price) x 100)
Running yield is 1.5%, gain to maturity is £58, number of years to maturity is 17,
clean price is £42
1.5% + (((58/17)/42) x 100)
1.5% + ((0.081) x 100)
1.5% + 8.1% = 9.6%