Question

1. A bond with a coupon rate of 7% makes semiannual coupon payments on January 15 and July 15 of each year. The Wall Street Journal reports the ask price for the bond on January 30 at 100.0625. What is the invoice price of the bond? Assume this bond use actual/actual day count convention, and the 6month coupon period has 182 days.   




2. Suppose that today's date is April 15. A bond with a 10% coupon paid semiannually every January 15 and July 15 is listed in The Wall Street Journal as selling at an ask price of 101.125. If you buy the bond from a dealer today, what price will you pay for it? Assume this bond use 30/360 day count convention.





3. A newly issued 10-year maturity, 4% coupon bond making annual coupon payments is sold to the public at a price of $800. What will be the price of the bond next year?

Answer 1

(1) Coupon Rate = 7%, Coupon Frequency: Semi-Annual, Coupon Dates: 15 Jan and 15 July, Ask Price = $ 100.0625 (clean price of the bond), Par Value = $ 100 (assumed)

Semi-Annual Coupon = 0.5 x 0.07 x 100 = $ 3.5

Number of days in 1 six month period = 182 days

Current Date: 30 Jan

Number of Days between last coupon date and current date = 15 days

Accumulated Interest = (15/182) x 3.5 = $ 0.28846

Invoice Price = Quoted Price (Clean Price) + Accumulated Interest = 100.0625 + 0.28846 = $ 100.35096 ~ $ 100.35

NOTE: Please raise separate queries for solutions to the remaining unrelated questions, as one query is restricted to the solution of only one complete question with up to four sub-parts.

Answer 2

Invoice Price: $1,003.51