The following information relates to Questions
bond G, described in the exhibit below, is sold for settlement on 16 June 2020.
$\begin{array} { l l }
\text { Annual Coupon } & 5 \% \
\text { Coupon Payment Frequency } & \text { Semi-annual } \
\text { Interest Payment Dates } & 10 \text { April and } 10 \text { October } \
\text { Maturity Date } & 10 \text { October } 2022 \
\text { Day Count Convention } & 30 / 360 \
\text { Annual Yield-to-Maturity } & 4 \%
\end{array}$
-The flat price for bond G on the settlement date of 16 June 2020 is closest to:
A) 102.18.
B) 103.10.
C) 104.02.

Question

The following information relates to Questions 
bond G, described in the exhibit below, is sold for settlement on 16 June 2020.
 $\begin{array} { l l } 
\text { Annual Coupon } & 5 \% \
\text { Coupon Payment Frequency } & \text { Semi-annual } \
\text { Interest Payment Dates } & 10 \text { April and } 10 \text { October } \
\text { Maturity Date } & 10 \text { October } 2022 \
\text { Day Count Convention } & 30 / 360 \
\text { Annual Yield-to-Maturity } & 4 \%
\end{array}$
-The flat price for bond G on the settlement date of 16 June 2020 is closest to:
A) 102.18.
B) 103.10.
C) 104.02.

Quizplus · Accepted Answer

The flat price of a bond is calculated without accounting for accrued interest. Given the semi-annual coupon of 5%, the bond pays 2.5% every six months. To find the flat price, we discount the future cash flows (coupons and principal) back to the settlement date using the yield-to-maturity. The bond has four coupon payments remaining and will be redeemed at par (100). Using the 4% annual yield (2% semi-annually) for discounting, the present value of these cash flows gives us the flat price, which is closest to 102.18.

The Following Information Relates to Questions Bond G, Described

The Following Information Relates to Questions
Bond G, Described