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Yield to maturity calculation
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Harry Trout
Posted: 11 October 2022 15:09:05(UTC)
#11

Joined: 08/06/2014(UTC)
Posts: 1,012

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Saltyrob;242197 wrote:
Would be grateful if a hypothetical worked example could be shown. Should have listened more in maths .

Many thanks

SR

Hi Saltyrob

There is a thread I started in the Money section called "Return on Gilts" which talks about these calculations. In the end, I decided to go with an IRR calculation because this is the method that makes sense to me and one I could explain to the bloke down the pub !!!

Here is my calculator for the 07/09/23 2.25% gilt which I got a quote on earlier and shows a 3.45% IRR, hope it helps. Happy to expand on how I did it if you would like to know more ....

111022 Gilt

paul armstrong;242374 wrote:
Sorry, hadn't spotted the one year interest thing. Why would you go through the telephone hassle and expense to buy a gilt maturing in one year rather than a short or ultrashort fund ??.

Hi Paul, buying an individual gilt might suit someone who wants a definite outcome over 1 year as opposed to a mixed duration fund which could be anywhere in a year's time?

I can buy gilts online through Hargreaves Lansdown, no more work than any other transaction.
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3 users thanked Harry Trout for this post.
Raj K on 11/10/2022(UTC), Saltyrob on 11/10/2022(UTC), paul armstrong on 11/10/2022(UTC)
Saltyrob
Posted: 11 October 2022 16:56:18(UTC)
#12

Joined: 10/11/2012(UTC)
Posts: 167
HI,
I'm looking at options to get the best return on cash over relatively short periods of time up to 12months and 24 months and with the help of the forum am getting a better understanding of how bonds work. As Harry mentioned purchase of gilts seems relatively straight forward if you use the HL platform. What every the outcome its been further education
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sofya eyers
Posted: 13 November 2022 10:50:50(UTC)
#13

Joined: 13/11/2022(UTC)
Posts: 1
The approximate yield to maturity excel formula of this bond is 11.25%, which is above the annual coupon rate of 10% by 1.25%. You can then use this value as the rate (r) in the following formula: C = future cash flows/coupon payments. r = discount rate (the yield to maturity)
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