How do I find the present value of a short position zero coupon bond? - find the value of a bond
It's a bit difficult if you do not have access to information from Reuters and Bloomberg, but it is necessary to obtain the "zero coupon" interest rate for the period concerned. If you are in the United States is fortunate to prices in the short and long term are about the same size, so that you can only use the Treasury yield.
If you receive this kind of (take a look at Yahoo Finance), the following formula:
discount_factor = 1 / (1 + r / 2) ^ (2 * t)
where r is the interest rate (ie 05 For the 5% for example), and t the number of years prior to the maturity of the zero-coupon bonds.
Note that in the world of derivatives professionals, the price of LIBOR, which is often right, in the vicinity of the money supply right now. I assume that means the issuer of this obligation is a very good credit rating. Do you have bad credit, such as GM, then you must use a credit spread sentence add "r" to get the correct number.
Finally, to obtain the answer if the nominal value is the zero-coupon 1 million dollars should multiply this number by the discount_fActors (which are always less than one).
Tuesday, December 29, 2009
Find The Value Of A Bond How Do I Find The Present Value Of A Short Position Zero Coupon Bond?
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1 comments:
When you say, short position, I assume that you sold the bond. If so, then that is what you do.
FV = the face value of the obligation.
N = time of the bond is (usually a year due)
I (/ O (interest per year) = yield or return on the current market)
PMT = O (which pay no interest.
And solve for PV. Best way is a financial calculator. If you do not, then it will keep going, just the various options examined PV equation.
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