A $10,000 bond pays coupons at j₂ = 10% every January 1 (day 1)and July 1 (day 182).It is purchased on March 15,2010 (day 74)to yield j₂ = 11%.The full (or dirty)price of the bond on March 15,2010 is $9578.38.What would be the price of the bond on the coupon date,January 1,2010?

Question

Quizplus · Accepted Answer

To find the price of the bond on the coupon date (January 1, 2010), we need to calculate how much the bond has accrued in interest from March 15 to January 1. This is equal to 292 days (365 days in a year - 74 days since March 15), or 1.6016 coupon periods (since each coupon period is 182.5 days).

Using the information given, we can calculate the accrued interest as follows:
Accrued Interest = Face Value x Coupon Rate x Accrual Period
Accrued Interest = $10,000 x 10% x 1.6016
Accrued Interest = $1,601.60

We can then add the accrued interest to the price of the bond on March 15 to get the price on January 1:
Price on Jan 1 = Price on Mar 15 + Accrued Interest
Price on Jan 1 = $9,578.38 + $1,601.60
Price on Jan 1 = $9,373.98

Therefore, the best choice is (C) $9,373.76.

A $10,000 Bond Pays Coupons at J2 = 10% Every

A $10,000 Bond Pays Coupons at J₂ = 10% Every