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RBA Bond Parcel Calculations...HELP

Discussion in 'Investing Strategies' started by toeyazz, 24th Jun, 2008.

  1. toeyazz

    toeyazz New Member

    Joined:
    5th Feb, 2008
    Posts:
    4
    Location:
    Melbourne
    Hi All,

    Still studying but I can see the light at the end of the tunnel ....except its being blocked by BOND PARCELS. Any help would be fantastic:

    Calculate Purchase Price;
    * 3 year Government bond parcel;
    * yield rate 4.75 paid as half yearly coupon
    * Market interest rate 5.75% and 175 days till maturity

    Applying the formula PV = FV + C / 1 + I

    **********That's all the info, I am still missing a value for the calculation??? Is there a set purchase price for government bond parcels? $100,000 or am I off the mark.

    If someone could show me how to apply this formula it would be greatly appreciated.
     
  2. AsxBroker

    AsxBroker Well-Known Member

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    Sydney, NSW
  3. ashwright

    ashwright Well-Known Member

    Joined:
    30th Nov, 2007
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    Location:
    Brisbane, Qld
    The face value is fixed, I think you are expected to remember what it is. (It has been a while since I have done it, but I think it is $100,000 for the RBA, you should check this on their site, or in the study notes.)
     
  4. ashwright

    ashwright Well-Known Member

    Joined:
    30th Nov, 2007
    Posts:
    116
    Location:
    Brisbane, Qld
    I also do not think that formula is right. I would calculate the Present Value of the future cash flows. (Their is only one coupon left to be paid, so makes it easy)

    ie.
    PV = FV(1+I/365)^T_days + C*(1+I/365)^T_days
    PV = FV(1+0.0575/365)^175 + FV*(0.0475/2)*(1+0.0575/365)^175
    which could be written as
    PF = (FV + C) * ( 1+I/365)^T_days

    However the the bottom formula is only useful if there is only one coupon left. I always use the top formula, as while it is longer it is easy to add to if there are more coupons.

    Cheers,
    Ash
     
    Last edited by a moderator: 24th Jun, 2008