In: Finance
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).
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