Question

On July 1, 2016, Tremel purchased a ten-year $5,000 bond. The bond has a stated interest...

On July 1, 2016, Tremel purchased a ten-year $5,000 bond. The bond has a stated interest rate of 5%, payable annually on July 1. On June 2, 2017, 336 days from the last interest payment, Tremel sold the bond. The selling price includes how much accrued interest?

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Answer #1

The Selling price Includes the accrued interest for the full year i.e. 336 days.

Because the interest recieved on bond is on annual basis and the interest recieved fully on bonds on 1 july 2017 but Tremel sold the bonds before coming this date. So, Accrued Interest which are recievable to Tremel is

The Accrued Interest is including in the Bond Selling price = $ 5,000 * 5% * 336 / 365

The Accrued Interest = $ 230.14

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