Question

on October 5, 2019 you purchase a $13,000 T note that matures on August 15, 2031

-(settlement occurs two days after purchase so you'll receive actual ownership of the bonds on October 7, 2019.

-The coupon rate on the T-note is 4.393% and the current price quoted on the bond is 105.8125%

-the last coupon payment occurred on May 15, 2019 (145 days before settlement) and the next coupon payment will be paid on November2019 (39 days from settlement)

On October 5, 2019, you purchase a $13,000 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 4.393 percent and the current price quoted on the bond is 105.8125 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)) Accrued interest due a. Dirty price b.

Answer 1

a). Accrued Interest Due = Coupon Payment * [Days since last coupon payment / Days in the period]

= [(4.393% / 2) * $13,000] * [145 / (145 + 39)]

= $285.55 * 0.7880 = $225.02

b). Dirty Price = Quoted Price + Accrued Interest

= [105.8125% * $13,000] + $225.02 = $13,755.63 + $225.02 = $13,980.65