Question

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 from settlement). (LG 6-2) a. Calculate the accrued interest due to the seller from the buyer at settlement. b. Calculate the dirty price of this transaction.

Answer 1

Answer :

Given that,

The T - note purchased on july 10,2019 for $10,000 and matures on December 31,2028.

The coupon rate on the T- note is 2.125

The current price on the bond is 98.250%

a) Accrued interest due = Face value * ( coupon rate * 1/2 ) * ( No. of days before settlement / No. of days after settlement )

= $ 10,000 * ( 2.125 * 1/2 ) * ( 11 days / 184 days )

= $ 6.35

b) Dirty price = Current price + Accrued interest due

= ( $10,000 * 98.250% ) + $ 6.35

= $ 9,825 + $ 6.35

= $ 9,831.35