Bond Calculations on the HP 12C

The HP 12C's bond functions (introduced in Section 4 of the manual, starting on page 76) allow you to calculate bond price (how much the bond costs today) or bond yield (the effective return, given the price). These are for fixed-rate bonds with semi-annual coupon payments, using the standard bond pricing formula under the risk-free rate assumption.

Key Concepts and Assumptions

• Bond Price: Present value of future coupons + principal, discounted at the yield.
• Bond Yield: The discount rate that equates the price to the PV of cash flows (solves for i).

Registers Used:

• n: Total semi-annual periods to maturity (years to maturity × 2).
• i: Semi-annual yield to maturity (annual yield ÷ 2, as %).
• PV: Bond price (enter as negative for purchase cost; result is negative).
• PMT: Semi-annual coupon payment (annual coupon rate × face value ÷ 2).
• FV: Face (par) value at maturity (e.g., 1000 or 100).

Assumptions (per manual, page 76):

• Semi-annual compounding and payments.
• 30/360 day count convention (default for corporate bonds; for U.S. Treasuries using actual/actual, see manual page 182 in Section 16).
• Settlement date is today; no accrued interest in basic calc (add manually if needed).
• END mode (payments at end of period): Press g END before starting.

Output: Price in PV; yield in i (multiply by 2 for annual).

Important: Always clear registers first to avoid errors.

Preparing the Calculator

• Turn on: ON.
• Clear financial registers: f CLEAR FIN (zeros n, i, PV, PMT, FV).
• Set payment mode: g END (standard for bonds; g BEG for advance payments, rare).
• Set display: f 2 (for 2 decimal places, common for prices).

Calculating Bond Price (Given Yield)

Enter FV, PMT, i, n; compute PV (price).

Step-by-Step

1. Enter face value: [FV] g FV.
2. Enter semi-annual coupon: [PMT] g PMT.
3. Enter semi-annual yield: [i %] g i.
4. Enter semi-annual periods: [n] g n.
5. Compute price: f PRICE.

Result: PV register (negative value = purchase price).

Example: Bond Price

A 10-year corporate bond with $1,000 face value, 8% annual coupon (semi-annual payments), current yield 9%. (Manual example similar on page 76.)

• Semi-annual coupon: $40 ($1,000 × 8% ÷ 2).
• Semi-annual yield: 4.5% (9% ÷ 2).
• Periods: 20 (10 years × 2).

Interpretation: The bond's fair price is $932.90 (below par due to higher yield than coupon). Positive NPV if bought below this price.

Calculating Bond Yield (Given Price)

Enter FV, PMT, n, PV (price as negative); compute i (yield).

Step-by-Step

1. Enter FV, PMT, n as above.
2. Enter bond price: [Price] CHS g PV (negative for cost).
3. Compute semi-annual yield: f YLD.
4. Annual yield: [i] × 2.

Example: Bond Yield

Same bond as above, but purchased at $932.90.

Interpretation: Yield to maturity is 9% annually. If this exceeds your required return, buy.

Reviewing or Changing Inputs

• Display a register: Press RCL [register #] (e.g., RCL 3 for PMT; financial registers are 0=P V, 1= n, 2= i, 3=PMT, 4=FV).
• Change: Re-enter and press g [key] (e.g., new i: 5 g i).
• Accrued Interest: Not automatic—add manually: (Days since last coupon ÷ Days in period) × Semi-coupon. (See manual page 77 for details.)

Advanced Notes from the Manual (Pages 76–77)

• Annual Coupon Bonds: Use Section 16 (page 185): Adjust PMT and n for annual payments (n = years, i = annual yield, PMT = annual coupon).
• 30/360 vs. Actual/Actual: Default is 30/360. For actual/actual (Treasuries), use the program in Section 16 (page 182) or manual procedure.
• Quoted Price: Often per $100 face; scale FV to 100 if needed.
• Errors: "Error 0" if n=0 or invalid inputs. Clear and retry.
• Partial Periods: For settlement not on coupon date, use odd-period TVM (Section 3, page 57).