Rx bond math question
Hi, I understand that bond math questions are asked in Rx interviews, but I can't seem to find any examples. Is someone please able to give an example of a question and how to solve it?
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Check this out. Interviewers can provide various bond characteristics and ask that you calculate an implied yield or call price. These interviewers are looking to confirm that you have a working knowledge of bond yields and influencing factors.
Thanks - understand the article. I was looking moreso for questions that they would ask you to do in your head like you mentioned calculating the yield or call price. I think there's a few tricks like shown below to make it easier. Have you received any bond questions in rx interviews?
Another way they can ask bond math questions is around current yield and ytm. Ex) a bond is trading at 80 with a 10% coupon. What is its ytm?
You should be able to do this in your head with rough math (i.e. no calculator).
How would you approach this question?
If it matures in 1 year: You get 10 from coupon, and 20 from capital appreciation. So 30 in total for an entry price at 80. So 30/80=37.5%
But I’d assume that they would give you a bond maturing in 2 years to be more realistic
I was wondering when interviewers ask this question are the coupons paid semiannually or annually? I read on RX Interviews that it is implied that coupons are paid out in 1 year but no so sure now..
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