Question is about ecnomics/finance programming in Python

OrnaOryyr123
timer Asked: Jan 21st, 2021

Question Description

Need help in ecnomics/finance programming in Python Question ? could you help ? document is attached kindly have a look.

Unformatted Attachment Preview

The yield to maturity, often shortened to simply yield, is the average rate of return, including the loss (or gain) of capital because the bond was purchased above (or below) par. For a bond, this is the r that makes the bond pricing formula equal to the current price. It is easy to find it numerically. One algorithm consists of the following steps: start with an initial guess, and compute the bond price p̂ from that guess. If p̂ is greater than the actual price, the guess is too low. If p̂ is lower than the actual price, the guess is too high. Each pass, we improve our guess by adding or subtracting a certain value (the step size). A good starting value for the step size is 0.02. The key for convergence is to decrease the step size every time we cross over (i.e., if the previous guess was to high, and the new guess is too low, reduce the step size before making the new guess.) Decreasing the step size by half works well. You stop when p̂ is close enough to the price (error is smaller than tolerance). Note that this is different than the example in the tutorial. Do not use a grid for this question. Write a function ytm(price, T, par=1000, c=0.0, n=2, initial ytm=0.1, tolerance=0.001) for computing the yield to maturity of a bond using the algorithm described above. The function takes the following parameters: a) price: the price of the bond. b) T: the maturity of the bond (in years). c) par: the face value of the bond (optional, default value=1000). d) c: the coupon rate of the bond (optional, default value=0.0). e) n: the number of coupon payments per year of the bond (optional, default value=0.2). f) initial ytm: the initial guess (optional, default value=0.1). g) tolerance: the stopping criteria (optional, default value=0.001). The function should call the provided price bond() function. The function should return a float with the yield to maturity of the bond. Note: for the provided tests, the code should execute instantaneously. If it takes time, you are doing something wrong. Example > >> print ( f ’{ ytm ( price = 1019 .32 , T =1 , par = 1000 , c = 0.08 , n =2 , i ni ti al _ ytm =0.1 , tol erance = 0 .0001 ) :0.5 f } ’) Out : 0 .05981
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

This question has not been answered.

Create a free account to get help with this and any other question!

Related Tags

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors