On 18 September 2021, JP Morgan has purchased 300 units of 5.00% p.a. 15-year Exchange Fund Note (EFN) from Standard Chartered. The purchase price of the EFNs is 112.13. The last interest payment was on 30 June 2021, which was 80 days ago (exclude end date). The next interest payment will be on 31 December 2021. From the last interest payment date to the next interest payment date, there is a total of 184 days (exclude end date).

(a) Draw a diagram for the above bond transaction from 30 June 2021 (last interest payment date) to 31 December 2021 (next interest payment date). Indicate the dates, time and events involved during the specified time period.

(b) With a par value of HKD50,000 per unit and 365 days in a year calculation.

i. Assess the total amount of accrued interest Standard Chartered should receive for selling EFNs to JP Morgan.

ii. Ignoring transaction cost, evaluate the lump sum which JP Morgan should pay to Standard Chartered on the settlement date for the purchase of the EFNs

(c) On 31 December 2021, the Exchange Fund paid the second coupon interest to EFN holders.

i. Find out the amount of coupon interest JP Morgan received on that day.

ii. Exclude the accrued interest previously paid to the seller (Standard Chartered) on settlement date (18 September), assess the net amount of coupon interest income entitled by JP Morgan.