Question

 

1. Jack and Jill Jones purchased of a one-thousand-dollar par value corporate bond that pays a three percent coupon. This bond is a long-term corporate bond with approximately seventeen years remaining until maturity. The bond price was equal to $975. They will pay for this bond and the accrued interest associated with this bond today. Coupon interest payments are made semi-annually. There are 183 days between the last semi-annual coupon interest payment and the next scheduled semi-annual coupon interest payment. The last semi-annual coupon interest payment was made 143 days ago. How much will Jack and Jill Jones pay in accrued interest?

1. $11.72
2. $10.72
3. $12.72
4. $13.72

 

2. Jack and Jill Jones purchased of a one-thousand-dollar par value corporate bond that pays a three percent coupon. This bond is a long-term corporate bond with approximately seventeen years remaining until maturity. The bond price was equal to $975. They will pay for this bond and the accrued interest associated with this bond today. Coupon interest payments are made semi-annually. There are 182 days between the last semi-annual coupon interest payment and the next scheduled semi-annual coupon interest payment. The last semi-annual coupon interest payment was made 37 days ago. How much will Jack and Jill Jones pay in accrued interest?

1. $ 3.05
2. $13.05
3. $ 4.05
4. $14.05

Answer 1

Ans 01 :

accrued interest = Coupon * ( Days since last Coupon Paid/Days Between Coupon Payments)

Here Semi Annual Coupon Payment of 3% of Par Value 1000

Coupon = (Coupon Rate * Par Value ) / 02 = ( 03% * 1000) / 02 = 15

Days since last Coupon Paid = 143

Days Between Coupon Payments = 183

  accrued interest = Coupon * ( Days since last Coupon Paid/Days Between Coupon Payments)

= 15 * ( 143 / 183)

= 11.72

Jack and Jill Jones pay in accrued interest = $ 11.72

Ans 02 :

accrued interest = Coupon * ( Days since last Coupon Paid/Days Between Coupon Payments)

Here Semi Annual Coupon Payment of 3% of Par Value 1000

Coupon = (Coupon Rate * Par Value ) / 02 = ( 03% * 1000) / 02 = 15

Days since last Coupon Paid = 37

Days Between Coupon Payments = 182

  accrued interest = Coupon * ( Days since last Coupon Paid/Days Between Coupon Payments)

= 15 * ( 37/ 182)

= 3.05

Jack and Jill Jones pay in accrued interest = 3.05

Ans : Jack and Jill Jones pay in accrued interest = $ 3.05