Question

On October 5, 2019, you purchase a $13,000 T-note that matures on August 15, 2031 (settlement...

On October 5, 2019, you purchase a $13,000 T-note that matures on August 15, 2031 (settlement occurs two days after purchase, so you receive actual ownership of the bond on October 7, 2019). The coupon rate on the T-note is 5.375 percent and the current price quoted on the bond is 105.5 percent. The last coupon payment occurred on May 15, 2019 (145 days before settlement), and the next coupon payment will be paid on November 15, 2019 (39 days from settlement).

a. Calculate the accrued interest due to the seller from the buyer at settlement.
b. Calculate the dirty price of this transaction.

a. Accrued interest due
b. Dirty price

Homework Answers

Answer #1

  

_______________________________

_______________________________

Semi Annual % = 0.05375 /2 = 0.026875

Answer a)

Accrued Interest Percentage = Semi annual Rate x [ NO. of days before settlement / (NO of days before settlement + NO of days after settlement)]

Accrued Interest Percentage = 0.026875 x [ 145/ (145 + 39) ] = 0.021179

Accrued Interest = 13,000 x 0.021179 = 275.33


Answer b.)

Dirty Price Percentage = Current Price% + Accrued Interest% = 105.5% + 2.1179% = 107.6179%

Dirty Price = 13000 x 107.6179% = 13990.327

NOTE: Do upvote the answer, if this was helpful.

NOTE: Please don't downvote directly. In case of query, I will solve it in comment section in no time.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On October 5, 2019, you purchase a $13,000 T-note that matures on August 15, 2031 (settlement...
On October 5, 2019, you purchase a $13,000 T-note that matures on August 15, 2031 (settlement occurs two days after purchase, so you receive actual ownership of the bond on October 7, 2019). The coupon rate on the T-note is 5.375 percent and the current price quoted on the bond is 105.5 percent. The last coupon payment occurred on May 15, 2019 (145 days before settlement), and the next coupon payment will be paid on November 15, 2019 (39 days...
On October 5, 2019, you purchase a $11,000 T-note that matures on August 15, 2031 (settlement...
On October 5, 2019, you purchase a $11,000 T-note that matures on August 15, 2031 (settlement occurs two days after purchase, so you receive actual ownership of the bond on October 7, 2019). The coupon rate on the T-note is 4.385 percent and the current price quoted on the bond is 105.5625 percent. The last coupon payment occurred on May 15, 2019 (145 days before settlement), and the next coupon payment will be paid on November 15, 2019 (39 days...
On October 5, 2019, you purchase a $14,000 T-note that matures on August 15, 2031 (settlement...
On October 5, 2019, you purchase a $14,000 T-note that matures on August 15, 2031 (settlement occurs two days after purchase, so you receive actual ownership of the bond on October 7, 2019). The coupon rate on the T-note is 4.500 percent and the current price quoted on the bond is 105.65625 percent. The last coupon payment occurred on May 15, 2019 (145 days before settlement), and the next coupon payment will be paid on November 15, 2019 (39 days...
On October 5, 2019, you purchase a $15,000 T-note that matures on August 15, 2031 (settlement...
On October 5, 2019, you purchase a $15,000 T-note that matures on August 15, 2031 (settlement occurs two days after purchase, so you receive actual ownership of the bond on October 7, 2019). The coupon rate on the T-note is 4.395 percent and the current price quoted on the bond is 105.875 percent. The last coupon payment occurred on May 15, 2019 (145 days before settlement), and the next coupon payment will be paid on November 15, 2019 (39 days...
On October 5, 2019, you purchase a $10,000 T-note that matures on August 15, 2031 (settlement...
On October 5, 2019, you purchase a $10,000 T-note that matures on August 15, 2031 (settlement occurs one day after purchase, so you receive actual ownership of the bond on October 6, 2019). The coupon rate on the T-note is 4.375 percent and the current price quoted on the bond is 105.250 percent. The last coupon occurred on May 15, 2019 (144 days before settlement), and the next coupon payment will be paid on November, 2019 (40 days from settlement)....
) On July 5, 2020, you purchase a $100,000 T-note that matures on July 15, 2031...
) On July 5, 2020, you purchase a $100,000 T-note that matures on July 15, 2031 (settlement occurs One day after purchase, so you receive actual ownership of the bond on July 6, 2020). The last coupon payment occurred on February 15, 2020 (144 days before settlement), and the next coupon payment will be paid on August 15, 2019 (40 days from settlement). The coupon rate on the T-note is 4.750 percent and the current price quoted on the bond...
On July 10, 2019, you purchase a $10,000 T-note that matures on December 31, 2028 (settlement...
On July 10, 2019, you purchase a $10,000 T-note that matures on December 31, 2028 (settlement occurs one day after purchase, so you receive actual ownership of the bond on July 11, 2019). The coupon rate on the T-note is 2.125 percent and the current price quoted on the bond is 98.250 percent. The last coupon payment occurred on June 30, 2019 (11 days before settlement), and the next coupon payment will be paid on December 31, 2019 (173 days...
On October 5, 2XX1, Bill purchases a $4,000 T-note that matures on August 15, 2X14 (settlement...
On October 5, 2XX1, Bill purchases a $4,000 T-note that matures on August 15, 2X14 (settlement occurs one day after purchase, so he receives actual ownership of the bond on October 6, 2XX1). The coupon rate on the T-note is 7.966 percent and the current price quoted on the bond is 102 percent of face. The last coupon payment occurred 99 days before settlement, and the total days between interest payment dates is 182 days. Calculate the dirty price of...
1. Assume that you held a Treasury note that makes coupon payments on May 15 and...
1. Assume that you held a Treasury note that makes coupon payments on May 15 and November 15. The number of days between each coupon payment is 184. Suppose you sold the bond on June 27, 2016. If the number of days between May 15 and June 27 is 43, the bond carried a coupon rate of 3.875% and matures as of May 15, 2026 ($1,000 par value), a) What would have been the settlement (dirty) price on June 27,...
The bond prices that you see quoted in the financial pages are not the prices you...
The bond prices that you see quoted in the financial pages are not the prices you pay for the bond. It is because the quoted price does not include the interest that accrues between coupon payments dates. If a bond is purchased, the buyer must pay the seller for accrued interest. Therefore, invoice price of a bond includes quoted price and accrued interest. Suppose that coupon rate is 7%. Coupons are paid semiannually. 157 days have passed since the last...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT