Question

On October 5, 2019, you purchase a $15,000 T-note that matures on August 15, 2031 (settlement occurs two days after purchase, so you receive actual ownership of the bond on October 7, 2019). The coupon rate on the T-note is 4.395 percent and the current price quoted on the bond is 105.875 percent. The last coupon payment occurred on May 15, 2019 (145 days before settlement), and the next coupon payment will be paid on November 15, 2019 (39 days from settlement). a. Calculate the accrued interest due to the seller from the buyer at settlement. b. Calculate the dirty price of this transaction. (For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

a.	Accrued interest due
b.	Dirty price

Answer 1

(a)	Accrued Interest Due	$ 259.76
(b)	Dirty Price	16,141.01

(a)- The accrued interest due to the seller from the buyer at settlement.

Accrued Interest Due = Face Value x [Coupon rate x ½] x[No of days before settlement / No of days after settlement]

= $15,000 x [4.395% x ½] x [145 Days / (145 Days + 39 Days)]

= $329.63 x [145 Days / 184 Days]

= $259.76

(b)-Dirty Price for the transaction

Dirty Price = Current Price + Accrued Interest

= [$15,000 x 105.875%] + $259.76

= $15,881.25 + $259.76

= $16,141.01