Simple YTM
Hi all, just a back to basics question. Why in the denominator of the simple YTM formula, is the average price between par and price paid used? I get the math mechanics, but now I'm looking at this from a 1,000 feet view. My rationale is that since this is the simple version of the formula, then it is okay to use bad math, so the denominator is just looking for some "middle ground" to use a reference point?
Any thoughts? Many thanks.
YTM = C + [(F – P)/n] ÷ (F + P)/2
Where C = coupon rate
F = face value
P = purchase price
n = number of years
Iusto omnis quaerat aspernatur ex et vel. Consectetur consectetur voluptas dolor dolores. Et illum est non dolores eius harum qui. Aperiam soluta explicabo dolor in. Maiores dolorem adipisci consectetur est perspiciatis corrupti soluta laudantium.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...