Question

If a nominal bond of 500 euros, at the rate of 5%, issued on 25.10 2019, redeemable on 22.12. 2019. What was the coupon accrued on 22.12. 2019?

Answer 1

We have, Coupon rate = 5% p.a. ; Face value of a bond = 500 euros

Therefore, yearly coupon on the given bond (C) = 0.05 x 500 = 25 euros

So, the fraction of coupon accried for the given period of time i.e., between 25.10.2019 (inclusive) and 22.12.2019 (exclusive), assuming a Actual/365 days convention (commonly used for euro denominated bonds), can be calculated as follows:

Actual no. of days between given dates = 7 + 30 + 21 = 58

Fraction of days = 58/365

Therefore, interest accrued on 22.12.2019 = 25 x (58/365) = 3.97 euros