BA II Plus: bond worksheet versus plain TVM
The BOND worksheet handles day-count conventions; for a clean coupon-date bond, plain TVM is faster.
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When TVM is enough
A bond priced on a coupon date is an annuity plus a lump sum, so the TVM keys price it directly: N is the number of coupons remaining, I/Y the yield per coupon period, PMT the coupon amount, FV the redemption value. CPT PV gives the price.
For a 1,000 par 10-year bond with 8% annual coupons at a 6% yield: 10 N, 6 I/Y, 80 PMT, 1000 FV, CPT PV returns −1,147.20.
When the BOND worksheet earns its keep
2ND · BOND handles settlement between coupon dates, where accrued interest and a day-count convention (30/360 or actual/actual) matter. It asks for settlement date, coupon rate, redemption date, redemption value and yield, and returns both the clean and dirty price.
- SDT — settlement date, entered as MM.DDYY.
- CPN — annual coupon RATE as a percentage, not the coupon amount.
- RDT — redemption date.
- RV — redemption value per 100 of par.
- ACT/360 — the day-count basis; 2ND SET toggles it.
- YLD then CPT PRI, or PRI then CPT YLD.
The semiannual trap
Most bonds pay semiannually. In TVM that means halving the coupon rate and the yield and doubling N; in the BOND worksheet it means setting the 2/Y field. Mixing the two conventions — an annual yield with semiannual coupons — is the single most common bond error on the exam.