When the YTM is known, we can get back the bond price in the same way we used the pricing equation. This is implemented by the bond_price() function:
In [ ]:
def bond_price(par, T, ytm, coup, freq=2):
freq = float(freq)
periods = T*2
coupon = coup/100.*par
dt = [(i+1)/freq for i in range(int(periods))]
price = sum([coupon/freq/(1+ytm/freq)**(freq*t) for t in dt]) + \
par/(1+ytm/freq)**(freq*T)
return price
Plugging in the same values from the earlier example, we get the following result:
In [ ]:
price = bond_price(100, 1.5, ytm, 5.75, 2)
print(price)
Out[ ]:
95.04279999999997
This gives us the same original bond price discussed in the earlier example, Calculating the yield to maturity. With the bond_ytm() and bond_price() functions, we can apply these for further uses in bond pricing...
