Hello all,
I am aware of the concept of “find it yourself through trial and error” and I always do, except when I don’t, i could ask experienced peers like yourselves. Therefore, for a very straightforward and simple concept, I am struggling to distinguish between the difference of PV Full = PV Flat + AI and PV Full = PV Flat x (1+r)^(t/T).
Can anyone advise on what the difference is? My best guess is that you must adapt to different styles of questions and know when to use which formula, fine, but these formulas are identical, or so I think?
Any insight would be more than appreciated, thank you all.
Question to look at as an example:
Bond G, described in the exhibit below, is sold for settlement on 16 June 2020.
| Annual Coupon | 5% |
|---|---|
| Coupon Payment Frequency | Semiannual |
| Interest Payment Dates | 10 April and 10 October |
| Maturity Date | 10 October 2022 |
| Day Count Convention | 30/360 |
| Annual Yield-to-Maturity | 4% |
Q. The full price that Bond G settles at on 16 June 2020 is closest to: