Issuance of zero-coupon convertible bonds is booming.
We define a function representing the bond payment as a function of the bond object and yield to maturity. We will use the same label several times in the following examples. Here are the full payments of bond3, bond10, and bond30. The result returned by Convexity is in periods squared. It is interesting to look at the bond payment as a function of the length of time between the settlement and maturity. Now we compute the yield to maturity using this payment as the price. Issuance of zero-coupon convertible bonds is booming.
So if we want to have the result in years squared we have to divide by the bond's frequency squared. The premium on Brightpoint's zero, for example, was 20 percent when issued. We can compare the payment-yield curves for bond3, bond10, and bond30. Here is the date of the third coupon payment counted backward from maturity. Treasury bond paying semiannually as a function of the coupon rate c and the yield to maturity y. And even if the stock stays where it is, the premium will expand to 46 percent in five years. The price of a bond is calculated the same way you get the price for any investment.
If we want it in years, we have to divide by the bond's frequency. Finance Gates provides personal finance advice on banking, insurance, investing and billing. We can generate the dates of the cash flows for a given bond and settlement directly.