On Thursday, July 22, 2010, you bought (traded) the FG, Inc. 6.75% corporate bonds for $101.25....

On Thursday, July 22, 2010, you bought (traded) the FG, Inc. 6.75% corporate bonds for $101.25. The coupon payments are paid on May 31 and November 30. Using the 360-day accrual basis, calculate the invoice price of the bonds. Please use T+3 to calculate the settlement day (use 2 decimals).

Solutions

Expert Solution

Given Purchase date as July 22,2010. Considering T+3 settlement date is July 25,2010.

The invoice price= Quoted price + Accrued Interest

The following details to be considered for calculating Accrued Interest.

1) Days since last coupon= May 31 to July 25 i.e 55 days

2) Total days between coupon payments= 180 days i.e from May 31 to November 30.

3) Coupon Payment= ($101.25 * 6.75%) ÷ 2 = $3.42

Considering all the above details in below formula

Calculation of Accrued Interest=( Days since last coupon/ Total days between coupon payment) * Coupon Payment

= (55/180) * $3.42 = $1.04

Invoice price= Quoted price + Accrued Interest

= $101.25 + $1.04

= $102.29

jeff jeffy answered 2 years ago

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