Question

Table 14.0 (for questions 14 and 15). Information regarding Bond G, sold for settlement on June 16, 2014.

Annual Coupon	5%
Coupon Payment Frequency	Semiannual
Interest Payment Dates	10 April and 10 October
Maturity Date	10 October 2016
Day-count Convention	30/360
Annual Yield-to-Maturity	4%

4. For Bond G listed in Table 14.0 what is the accrued interest per 100 of par value on the settlement date of June 26, 2014 is:

1.06	0.75
0.92	none of the above.

5. What is the full price, at settlement on June 26, 2014, of Bond G in Table 14.0?

101.90	103.84
104.11	none of the above.

Answer 1

1. Accrued Interest = Par Value * Interest Rate * Days Accrued / 360

Accrued Interest = 100 * 0.05 * 76 / 360

Accrued Interest = $1.06

2. Price at October 10 2014 = Coupon * PVAF ( 0.02, 4) + Maturity * PVF (0.02,4)

Price at October 10 2014 = 2.50 * 3.8077 + 100 * 0.9238

Price at October 10 2014 = 101.9039

Price as on June 26 = (Price at October 10 + Interest) / (1 + 0.04*104/360)

Price as on June 26 = (101.90 + 5) / (1 + 0.04*104/360)

Price as on June 26 = $103.84