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Basic Question 3 of 9
The cum-coupon transaction price is 98-7/32 for a semi-annual pay, 7-3/8% coupon bond. One and a half months have elapsed since the last coupon payment. What is the accrued interest for $1,000,000 par value of this bond?
B. $9,218.75
C. $12,291.67
A. $6,145.83
B. $9,218.75
C. $12,291.67
User Contributed Comments 17
| User | Comment |
|---|---|
| cgeek | (7 3/8%) ? |
| kalps | yes it is standard convention |
| danlan | Use face value instead of the market value (98-7/32) |
| Done | (7 3/8) = 7.375% |
| lijia1 | what does '98-7/32'and '7-3/8%'mean? |
| shinyman | 98-7/32 = 98 + 7/32 and 7-3/8 = 7 + 3/8 |
| ashok1959 | Better way is 1000000*.07375 divided by 12 and mutiply by 1.5 = 9218.75 |
| NavdeepS | transaction price of a bond is irrelavent to the interest |
| euniceyew | why we have to use 1.5/6 instead of using 4.5/6 ? |
| fedha | Because 1.5 months have elasped since the last coupon pymt and 6.0 because is semiannual pay |
| gazza77 | 3/8 is a standard convention just like half a furlong or an eight of a chain is. Join the rest of the sane world and use the metric system people |
| Rchan89 | what is the significance of the 98 in this problem? |
| gulfa99 | par value of the bond is 100 coupon is paid on par value 98.375% of 100 has no significance when calculating accrued interest. 98.375 has significance when you calculate current yield or YTM. |
| michlam14 | the stock market prices are quoted in fractional points |
| pranubal | why 98 -7/32 is there, if gulfa99 explanation is right, then why par value is mentioned as $1,000,000 |
| robbiecow | its there for obfuscation |
| ibrahim18 | Don't be confused with the transaction price. It has no link with the interest. |
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Learning Outcome Statements
calculate a bond's price given a yield-to-maturity on or between coupon dates
CFA® 2024 Level I Curriculum, Volume 4, Module 6.