CASIO fx-9750GII for bond evaluation problems I am having a problem using my cal

Question

CASIO fx-9750GII for bond evaluation problems

I am having a problem using my calculator for bond problems when it comes to using semi-annual payments. Here are two nearly identical questions, both calling for semi-annual payments. One is giving me a correct answer when I set it to semi-annual on my calculator, but the other is giving me the correct answer when the calculator is set to annual…. Please help.

Question 1:

“A 10% coupon rate bond makes semi-annual interest rate payments. Par value is $1000. The bond matures in 13 years. The required rate of return is 8.27%. What is the current price?”

My Screen:

d1 01M01D2000Y

d2 01M01D2013Y

RDV = 100

CPN = 10

PRC = 0 (until I solve obvisouly)

YLD = 8.27

I am able to solve for the correct answer ($1,134.73), but when I solve for this correct answer, it is done under “annual” calculation in the set up menu when the question states semi annual interest rates.

BUT, when I solve this second almost identical question, I get the correct answer using “semi-annual” calculation in the set up menu, and if I switch it to annual it gives me an incorrect answer.

“A 7.5% coupon rate bond makes semi-annual interest rate payments. Par value is $1,000. The bond matures in 7 years. The current price of the bond is $948.25. Calculate the bonds YTM

My Screen:

d1 01M01D2000Y

d2 01M01D2007Y

RDV = 100

CPN = 7.5

PRC = -94.825

YLD = 0 (until I solve obvisouly)

When I solve under “semi-annual”, I get the correct answer of 8.496%, but “annual” gives me an incorrect answer.

The only difference I can see in these questions is one is asking for price and one is asking for YTM, but both give semi-annual payments and only one is giving me the correct answer using the semi-annual setting on my calculator. Am I doing something wrong or is there a way to get the correct answer in both questions using the semi-annual setting. This has been confusing me a lot on various problems.

Explanation / Answer

Soln : Well from where you have checked your answer, I am actually calculating the right anwers here through excel :

lets try this in 1st case, here coupon = $50 = 10%*1000/2..............(semi annual)

period = 13*2 = 26 and rate of discounting = 8.27/2 = 4.135%

On calculating the price = 50/(1.04135)^1 + 50/(1.04135)^2+ ...................50/(1.04135)^25 + (1000+50)/(1.04135)^26 = $1136.24

Current price in 1st case should be = $1136.24 and not 1134.73, which you can get the same in excel also.

While, in 2nd case if we will calculate it in excel by using formula rate = Rate (nper,pmt,PV, Fv,0)

We will get the YTM = 8.496% which is correct

So, i think better to check you r answer, your calculator is showing you right and you need to put semi annual for each question, you are inputting the values correctly.

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