Question

Consider Bond AAA:

Coupon rate: 9.4% per year

Yield to maturity: 10.6% per year

Settlement date: 16 July 2020

Maturity date: 9 October 2046

Calculate the all-in price, accrued interest and clean price for bond AAA.

Answer 1

As the coupon frequency is not given, it is assumed to be an annual coupon bond.

Clean price of bond is calculated using PRICE function in Excel.

Settlement = settlement date

Maturity = maturity date

rate = coupon rate

yld = yield to maturity

redemption = redemption value (% of par). This is 100, as the bond is redeemable at par.

frequency = coupons per year

By inputting the values into this function, we get the bond price per $100 of par value.

As the par value of this bond is $1,000, we multiply the answer by 10 ($1,000 / $100)

The clean price of bond is $894.00

Accrued interest = face value * coupon rate * (number of days since last coupon payement / 360)

number of days since last coupon payement = number of days from 9 October 2019 to  16 July 2020

number of days since last coupon payement = 280

Accrued interest = $1,000 * 9.4% * (280 / 360)

Accrued interest = $73.11

All in price = Clean price + Accrued interest

All in price = $894.00 + $73.11

All in price = $967.11