Question

Calculate the amount to be paid by the buyer of the 10-year bond 20/05/2008-2018, at a fixed interest rate of 8.60%, with a par value of 500,000,000$, with price at 98.5 on

a) 20/06/2012

b) 20/04/2013

c) 20/07/2013.

Answer 1

98.5% is the clean price of he bond on that day. Total amount to be paid will be clean price + accrued interest.

Please see the table below. Please be guided by the second row to understand the mathematics. The last column highlighted in yellow is your answer. Figures in parenthesis, if any, mean negative values. All financials are in $. All dates are in dd/mm/yyyy format.

Settlement Date	Last coupon date	Next coupon date	Days since last coupon	Actual number of days between last and next coupon	Interest rate	Accrued Interest	Clean Price	Total Payment
A	B	C	D = A - B	E = C - B	F	G = 500,000,000 x F x D / E	H = 98.5% x 500,000,000	G + H
20/06/2012	20/05/2012	20/05/2013	31	365	8.60%	3,652,055	492,500,000	496,152,055
20/04/2013	20/05/2012	20/05/2013	335	365	8.60%	39,465,753	492,500,000	531,965,753
20/07/2013	20/05/2013	20/05/2014	61	365	8.60%	7,186,301	492,500,000	499,686,301