Use semi-theoretical method for the calculations in the following questions: (a)

Question

Use semi-theoretical method for the calculations in the following questions: (a) A $1,000 bond with 8% semi-annual coupons is being sold 3 years and 1.5 months before the bond matures. If held to maturity, the purchase will yield 6% convertible semi-annually to the buyer. Determine the full price, accrued coupon, and clean price. (Answer: $1086.12, $30, $1056.12) (b) Rework (a) assuming the bond pays coupons on March 1 and September 1, matures on September 1, and is being sold on July 15 (3 years and 1.5 months prior to maturity). Use the 30/360 day-count convention. (Answer: $1085.94, $29.78, $1056.16) (c) Rework (b) using the actual/actual day-count convention. (Answer: $1085.77, $29.57, $1056.20)

Explanation / Answer

Ans;

Clean Price = Face Value + Yield to Maturity

                   =1000+56.12 = $1056.12

                           =1000*8/2*135/180

                           =$30

Dirty Price = Clean Price + Accrued Interest

                  =$1056.12+$30

                  =$1086.12

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.