It is now October 25.Jenny has just purchased a ten-year 4.5% Canadian government bond quoted at 96.894.The last semi-annual coupon payment was made on June 30 in the same year.How much will Jenny actually pay for this bond?

Question

Quizplus · Accepted Answer

The bond is quoted at 96.894% of the face value, so Jenny will pay:

96.894% x $1000 = $968.94

Since the last coupon payment was made on June 30, Jenny will also have to pay the accrued interest from July 1 to the settlement date. This is 117 days (from July 1 to October 25), so Jenny will pay:

(4.5% / 2) x ($1000 / 2) x (117 / 182) = $14.58

Therefore, the total amount Jenny will actually pay for the bond is:

$968.94 + $14.58 = $983.36

Thus, the best choice is D.

It Is Now October 25