Question

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 this T-note. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Answer 1

answer :- Dirty Price = $4166.663

.

Explanation :-

Dirty Price = Quoted Price + Accrued Interest

Accrued Interest Due = Coupon Payment * [Days since last coupon payment / Days in the period]

T- Notes interest are paid semi- annually , so divide the coupen payment with 2

   = [(7.966% / 2) * $4,000] * (99/ 182)

   = $159.32 × 0.543956 = $86.663

Quoted Price    = Quoted rate of bond × purchase price

   = [102% × $4,000]

=$4080

. Dirty Price = Quoted Price + Accrued Interest

   = $4080 + $86.663

Dirty Price = $4166.663