A $25 000, 10% bond redeemable at par on December 1, 2025, is purchased on September...
A $25 000, 10% bond redeemable at par on December 1, 2025, is purchased on September 25, 2014, to yield 7.6% compounded semi-annually. Bond interest is payable semi-annually. Note: June 1, 2014 to December 1, 2025 = 11.5 years.
1.What is the cash price?
2. What is the accrued interest?
3.What is the quoted price?
Homework Answers
1: Cash price=29546.64
Using financial calculator
Input: FV=25000
PMT=10%*25000/2 = 1250
I/Y=7.6/2 = 3.8
N=11.5*2 = 23
Solve for PV as -29546.64
2: Accrued interest = Coupon rate*FV*days till last interest/Total days
= 10%*25000*116/365
=794.52
3: Quoted price= 29546.64-794.52 = $ 28752.12
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