Question

Use Excel functions to answer this question

A bond with a face value of $100,000 and coupon interest paid semi-annually at an annual rate of 7.50% per annum was issued on 8 May 2013 for 4 years. Similar bonds are now selling at a yield-to-maturity of 7.41% per annum. Based on the most recent and next coupon dates, work out the accrued interest on the settlement date (20-Jan-2015). Please use Actual/Actual as the interest rate basis and leave the Calc_method as its default.

Answer 1

Previous coupon date = 8^th November 2014

Next coupon date = 8^th May 2015

Settlement Date = 20^th January 2015

Coupon rate = 7.5%

Par value = 100,000

Payment frequency = 2 (Semi annual frequncy = 2)

Basis = Actual / Actual (Actual / Actual = 1)

Accrued Interest = ACCRINT(Issue date, first interest date, settlement date, rate , par, frequency, [Basis] . [Calculation_method])

Accrued Interest = ACCRINT(Previous coupon date, Next coupon date, Settlement Date, Coupon rate, Par value,Payment frequency, Basis)

Accrued Interest = ACCRINT(DATE(2014,11,8), DATE(2015,5,8), DATE(2015,1,20), 7.50%, 100000, 2,1)

Accrued Interest = $1512.4309