Question
You initiated a transaction to purchase a 4.000% coupon 30-year corporate bond on Friday 8/30/2019. The maturity date of the bond is 3/25/2029 and its
You initiated a transaction to purchase a 4.000% coupon 30-year corporate bond on Friday 8/30/2019. The maturity date of the bond is 3/25/2029 and its yield to maturity is 3.654%. Please answer the following questions about this bond. (Note: you can check your work in parts (f), (g), and (h) using the BOND spreadsheet in your calculator, but I want to see the equations set up and worked through in those parts for full credit.)
(a) What are the two dates every year on which the bond pays its coupons.
(b) On what date was the last (previous) coupon paid?
(c) What is the settlement date (SDT) for this bond? (Remember the Labor Day holiday!)
(d) How many days are there in the current coupon period?
(e) How many days between the last coupon and the SDT?
(f) What is the full price of the bond on the SDT? Draw a timeline for just the current coupon period (like we did in class) and calculate the bond’s full price using “Method 2” in the handout, which is the method used in the text and slides).
(g) What is the accrued interest on the SDT?
(h) What is the clean price of the bond on the SDT?
Step by Step Solution
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a The bond pays its coupons on March 25 and September 25 every year b The last coupon was paid on Ma...Get Instant Access to Expert-Tailored Solutions
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