Question

13-
Annual Coupon 5%

Coupon Payment Frequency Semiannual

Interest Payment Dates    14 Mar and 14 Sep
Maturity Date 14 Sep 2016
Day- count Convention 30/360
Annual Yield -to-Maturity 4%

For Bond Z listed above what is the accrued interest per 100 of par value on the settlement date of 23 Aug 2014 is
A. $4.42
B. $1.50
C. $2.21

14- The bond equivalent yield of a 180 day banker's acceptance quoted at a discount rate of 2.25% for a 360-day year is closet to
A. 2.31 %
B. 1.51 %
C. 3.01 %

15- A 365 day year bank certificate of deposit has an initial principal amount of USD 97.5 million and a redemption amount due at maturity of USD 100 million. The number of days between settlement and maturity is 180. The bond equivalent yield is closest to
A. 2.50%
B. 5.20%
C. 3.48%

Answer 1

Answer 13: $2.21

Accrued interest = semiannual coupon payment * (days difference between last payment date and current date)/180

Last payment happened on 14th March 2014.

Since the day count convention is 30/360, the days difference between 23 Aug 2014 and 14th March 2014 = 1589days (150 days upto 14th August 2014 + 9 more days from 14th august tot 23rs August).

Thus accrued Interest = 2.5*159/180 = $2.21

Answer 14: 2.31%

Bond equivalent yield = 365/180 * (100-PV)/PV

Since bond is selling at a discount rate of 2.25%, the PV for 360 day year = (1- (180/360)*0.0225)*100 = 98.875

Bond equivalent yoeld = (365/180)*(100-98.875)/98.875 = 2.31%

Answer 15: 5.20%

Bond equivalent yield = 365/180 * (100-PV)/PV

PV is given as 97.5

Bond equivalent yield =365/180 *(100-97.5)/97.5 = 5.20%