I wonder if I have misunderstood what the formula does

I am assuming that interest on the bond is paid out annually, so if I buy
the bond on the anniversery of the issue date, interest on the period before
my purchase is not
an issue

My first example involves cash flows as follows
-100 Sett Date (when I buy the bond) 31/12/2009
+110 Maturity (when the bond terminates and pays capital and one years
interest 31/12/2010
Clearly here the return is 10%
and the bond issue date is not relevant

The reason I showed issue date as 1 day before settlement date is the
formula will not accept the same issue date and settlement date

Is the formula assuming that no interest is paid out, but accumulates in the
bond - if so, I see that this will give a different result depending on issue
date

Can you tell me the underlying calculation for the YieldMat function?

If this is the case, is there a formula which assumes interest is paid out
and calculates the cash flows from settlement date forward - or should I use
the formula with issue date one day before settlement, which (apart from the
tiny interest difference) gives me an answer the same as I would get using
IRR with the cash flows.

Rgds


"Sean Timmons" wrote:

I must disagree.

the bond has achieved a portion of maturity prior to settlement. In the
below examples, 1 day and 1 year respectively. The clear indication is that
those days you do not have the bond in "possession" do not accumulate
interest in your name. (Please note, in the first example above, the return
is not precisely 100%, though the change occurs at a third decimal). Hope
thsi helps!

"BarryHWhite" wrote:

I think that the Date of Settlement was the date I purchased the bond.
Nothing to do with the original issue date, nor the maturity date

The parameters are
Syntax: YIELDMAT(S, M, I, R, PR[, B])

S = settlement date
M = maturity date
I = issue date
R = interest rate at date of issue
PR = the price of the security per $100 face value
B = (Optional) the day count basis to be used:

0 or omitted 30/360

So
My question remains
Example (dates UK format dd mm yy)

Yield to maturity 10.00%
Sett Date 31/12/2009
Maturity 31/12/2010
Issue Date 30/12/2009
Coupon yearly 10.000%
Price now 100.00
Days basis 3

But if the Issue date changes you get

Yield to maturity 9.09%
Sett Date 31/12/2009
Maturity 31/12/2010
Issue Date 31/12/2008
Coupon yearly 10.000%
Price now 100.00
Days basis 3

Which is wrong - you are paying out 100 now at 10% and will get 110 in one
year, so the yield to maturity should be 10% - does not matter when the bond
was issued







"Sean Timmons" wrote:

Based on MS Help, the rate and term are based on date of issue (not date of
settlement). So, if the security was issues on 1/1/08 on a 30 year bond, the
maturity date is 1/1/38, regardless of settlement date.

"BarryHWhite" wrote:

Why does Yieldmat include an issue date ?
The yield to maturity should be from the settlement date to the maturity
date, subject to the rate of interest and the price of the bond

It does not matter when in the past it was issued

However I see that changing the issue date changes the yield to maturity

Help please