Question

On Monday, May 15, 2017, you bought (traded) the XZX, Inc. 8.25% corporate bonds with a trading value of $96.50 price. The coupon payments are paid on March 31 and September 30. Using the 360-day accrual basis, calculate the invoice price of the bond. Please use T+3 to calculate the settlement day (use 2 decimals)

Answer 1

Here given,

Flate price of bond= $96.50

Coupon rate = 8.25% per annum, Face value of bond =$100 (assumed)

Date of purchase is May 15,

Since, last coupon payment was made on March 31,
Accrued Interest = face value *days since last payment* interest rate/days in current coupon period
= 100*45*8.25% / (2*180)
= 1.03

Now, Invoice Value = Flate price + Accrued Interest
= $96.50 + $1.03
= $97.53

Note: Days since last payment = May 15- March 31 = 45 days (taken flat)
Days in current coupon period = september 30 - march 31 = 180 days (taken flat)