I do not have the Kellison book and I was wondering if someone could tell me the formula for the bond salesman method. I think it is

g - (1/n)[(p-c)/c] /

1 + .5 [(p-c)/c]

where g = coupon / redemption value

n = number of periods

p = price

c = redemption value

I have come to this formula through inferrence from problems solved in the FM study manual but the BS method formula is never explicitly stated in the book. I think it is probably right, although, I am not sure about the ".5" in the denominator. I am not sure if that part is always supposed to be .5 or if it was .5 in the two examples I saw because they involved coupons being paid semianually. Thanks.

Live long and prosper,

Mr. Spock

g - (1/n)[(p-c)/c] /

1 + .5 [(p-c)/c]

where g = coupon / redemption value

n = number of periods

p = price

c = redemption value

I have come to this formula through inferrence from problems solved in the FM study manual but the BS method formula is never explicitly stated in the book. I think it is probably right, although, I am not sure about the ".5" in the denominator. I am not sure if that part is always supposed to be .5 or if it was .5 in the two examples I saw because they involved coupons being paid semianually. Thanks.

Live long and prosper,

Mr. Spock

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