An 8% semiannual coupon, $1000 par value 5years bond is issued on December 30,2002 and matures on December 30,2007. The Bond pays its coupons on June 30 and December 30 of each year. On February 15,2002 the bond has a yield to maturity of 6.5%. Accrued Interest on this date using the 30/360 Method is closest to:
A) $15
B) $20
C) $25
I am getting none of those answers, my Answer is $10. But as per the book the correct answer is B.
Could anyone please explain it.
Thanks
I get $10.22.
The author of the question is clearly wrong. Do they give an explanation of their calculation?
that’s their explanation:
The number of days over which coupon interest has accrued is 30(January) + 15(February) = 45
Accrued interest (based on the 30/360 method) = $1,000 x 8% x 45/180 = $20
I guess the mistake is that he took a full coupon while he should have taken a semi annual one.
You got it.
You should write to whoever published this and let them know that it needs correcting.
thanks for you input ! will do.
My pleasure.