BA II Plus (PV with multiple discount yields)
Could someone please tell me how I can solve for PV on a BA II Plus when I have different discount rates for each year of the given cash flow? In the context of a CFA® exam, they sometimes give a spot rate table instead of a one (all-years) discount rate. Is there are way to derive a one (all-years) discount rate from the spot rate table? else?
While we are at it...could someone please explain how I can solve for bond equivalent yield using a BA II Plus. This is when they give you "180 days has already passed for the bank certificate, what is the bond equivalent if its discount rate is XYZ". I am just trying to memorize 2 less formulas the exam.
Thanks a lot.
Have you read through the instruction manual? I think for the first one you just have to discount the cash flows individually. No idea for the second one.
Yes, you have to discount the cash flows individually. However, use of the parenthesis on your calculator makes it easier. You don't have to discount each of them and then add them up afterwards, you can do it all in one set of commands. Think of it like nesting formulas in excel.
Sounds good. Could you please talk about key strokes? On my BA II Plus I have this third line from the top with [N, I/Y, PV, PMT, and FV]. How can I plug in several discount rates into I/Y?
Thanks a lot
I use the TVM buttons to discount each cash flow, just by e.g. for the third cash flow doing N = 3, FV = x, I/Y = z, and solve for PV... and just quickly do that for each cash flow where clearly z is the spot rate to be used for that particular cash flow. Doesnt take long at all in CFA exam as won't generally have to discount more than 4 cash flows, and with the BA II I think using parantheses can be dangerous given you can't see the formula you have entered but a constantly updated version...
I see. Thanks a lot. I appreciate the time you took to explain this.
No problem.
Also, any recommendations on how I can BA II Plus the "bond equivalent" questions? I don't know how I can account for the periods (i.e. 180/360 has passed on the bank certificate with the discount rate of XYZ, what is the bond equivalent yield).
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