Question

8% seminannual coupon corp. bond which matures on Feb 14th 2025, is purchased for settlement on April 15th 2014. The yld to maturity is 6.333% quoted on a street convention semiannual bond basis (APR2). Accrued interest = 30/360 day count convention.

(a) What is the flat (clean) price of the bond on the SDT? (use the BA II Plus BOND spreadsheet)

(b) What is the accrued interest on the SDT? (use the BA II Plus BOND spreadsheet)

(c) How many days are there (“T”) in the current coupon period?

(d) How many days are there (“t”) between the last coupon date and the SDT?

Answer 1

Please see the table below. Please be guided by the last column to understand the mathematics. The cells highlighted in yellow contain your answer not necessarily in the same sequence as the questions appear. But all the answers are there. Figures in parenthesis, if any, mean negative values. All financials are in $. Adjacent cells in blue contain the formula in excel I have used to get the final output.

(a) What is the flat (clean) price of the bond on the SDT? (use the BA II Plus BOND spreadsheet) = $ 110.24

(b) What is the accrued interest on the SDT? (use the BA II Plus BOND spreadsheet) = $ 2.67

(c) How many days are there (“T”) in the current coupon period? = 120

(d) How many days are there (“t”) between the last coupon date and the SDT? = 60