What Issues Should One Be Careful of When Calculating the Bond

question 79

Essay

What issues should one be careful of when calculating the bond price from its yield to maturity using the "time value of money" (TVM) keys of a financial calculator?

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Definitions:

Normal Curve

A symmetrical, bell-shaped distribution where most occurrences take place around the mean and probabilities for values taper off as they move away from the mean.

Standard Deviation

A statistic that measures the dispersion or variability of a dataset relative to its mean, used to quantify the amount of variation.

Mean

The average of a set of numbers, calculated by dividing the sum of these numbers by their quantity.

Normally Distributed Random Variable

A variable that follows a normal distribution, characterized by its bell-shaped curve, where its mean, median, and mode coincide.