Question

#1. Here are all the bonds in a market. Today is 1/30/1970 CUSIP Maturity Coupon Code Date Quote Date Price Issue Date Next Coupon (96) Date 912810AE 2/15/1970 4 1/30/1970 100 1/15/1965 2/15/1970 912810AG 8/15/1970 4 1/30/1970 97.9375 6/20/1963 2/15/1970 912810АЈ 8/15/1971 4 1/30/1970 94.25 3/1/1962 2/15/1970 912810AN 8/15/1972 4 1/30/1970 90.5 9/15/1969 2/15/1970 912810AR 8/15/1973 4 1/30/1970 87.25 9/15/1963 2/15/1970 912827AG 1/15/1975 6 1/30/1970 99.28125 1/15/1966 7/15/1970 912827AJ 11/15/1970 5 1/30/1970 97.65625 2/15/1966 5/15/1970 912827АК 2/15/1971 5.375 1/30/1970 97.28125 8/30/1969 2/15/1970 Look at the bond "912810AJ" What is the accrued interest of the bond today? What is the dirty price? (The last coupon date is 8/15/1969. The number of days during the period from 8/16/1969 to 1/30/1970 is 168. The number of days during the period from 8/16/1969 to 2/15/1970 is 184.)

Answer 1

Hi,

Based on the query posted above, since type of bond (treasury / Corporate or Municipal Bonds) are not mentioned, taking consideration of Treasury as calculating interest based on exact number of days. Payments type is semi-annually based on above points mentioned in question, please find my answer as below:

Date of last coupon: 08/15/1969

Date of next coupon: 02/15/1970

Settlement date: 01/30/1970

Annual Coupon rate: 4 %

Bond price: 94.25

Payment : Semi-Annually

So, accrued interest on 01/30/1970 would be 1.72 .

A = Par Value multiply (*) Coupon rate / payment frequency multiply (*) No. of days since your latest coupon payment / Total no. of days in a payment period.

Dirty Price - It is a price of a bond which refers accrued interest (which earned but not received yet) since issue of the most recent coupon payment. It is compared with the price of a bond which is excluding the accrued interest.