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a bond is sold for settlement on 16 Feb 2018. It is a semi-annual coupon paying...

a bond is sold for settlement on 16 Feb 2018. It is a semi-annual coupon paying bond with 5% coupon rate. It makes coupon payment on April 10th and October 10th each year. The maturity date of bond G is 10/10/2018.

What is its full price, accrued interest and clean price on settlement date if it has 4% yield to maturity (Actual/Actual convention)?

Solutions

Expert Solution

Clean price of bond is calculated using PRICE function in Excel.

Settlement = settlement date

Maturity = maturity date

rate = coupon rate

yld = yield to maturity

redemption = redemption value (% of par)

frequency = coupons per year

basis = 1 (Actual/Actual convention)

By inputting the values into this function, we get the bond price per $100 of par value.

The clean price of the bond is $100.6260

Accrued interest = par value * coupon rate * (number of days since last coupon payment / 365)

Accrued interest = $100 * 5% * (129 / 365)

Accrued interest = $1.7671

Full price = clean price + accrued interest

Full price = $100.6260 + $1.7671

Full price = $102.3931

jeff jeffy answered 2 years ago
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