Question

17. At issue, coupon bonds typically sell ________.

A) above par value

B) below par

C) at or near par value

D) at a value unrelated to par

E) none of the above

18. Accrued interest

A) is quoted in the bond price in the financial press.

B) must be paid by the buyer of the bond and remitted to the seller of the bond.

C) must be paid to the broker for the inconvenience of selling bonds between maturity dates.

D) A and B. E) A and C.

19. The invoice price of a bond that a buyer would pay is equal to

A) the asked price plus accrued interest.

B) the asked price less accrued interest.

C) the bid price plus accrued interest.

D) the bid price less accrued interest.

E) the bid price.

20. An 8% coupon U. S. Treasury note pays interest on May 30 and November 30 and is traded for settlement on August 15. The accrued interest on the $100,000 face value of this note is _________.

A) $491.80

B) $800.00

C) $983.61

D) $1,661.20

Answer 1

Q17:

During issue, coupon bonds generally sell at or near par value

Q18:

option B: Accrued interest are not quoted with the bond price

Q19:

option A; invoice price/dirty price= ask price+accrued interest

Q20:

Accrued interest= semi annual coupon*(no of days remaining/no of days semi annual)

=4000*(76/183) =1661.2