A 6% coupon U.S.treasury note pays interest on May 31 and November 30 and is traded for settlement on August 10.The accrued interest on $100,000 face amount of this note is _________.

Question

Quizplus · Accepted Answer

The note pays interest on May 31 and November 30, and settlement is on August 10, which means the last coupon payment was made on May 31, and the next one will be made on November 30. Thus, the accrued interest is calculated from June 1 to August 10.

To calculate the accrued interest, we need to determine the number of days between June 1 and August 10, which is 71 days (including both days).

The annual coupon payment is $6,000 ($100,000 x 6%), and the daily coupon payment is $84.50 ($6,000 / 180 days). Therefore, the accrued interest is:

Accrued Interest = Daily Coupon Payment x Number of Days
Accrued Interest = $84.50 x 71
Accrued Interest = $5,999.50

Rounding this to the nearest cent, we get $5,999.00, which is half the semi-annual coupon payment. Therefore, the total accrued interest is $5,999.00 x 2 = $11,998.00.

Thus, the answer is B) $1,163.93.

A 6% Coupon U