Why would N be taken as 4?

CFA Level I Fixed Income
#1

A 5% bond makes coupon payments on June 15 and December 15 and is trading with a YTM of 4%. The bond is purchased and will settle on August 21 when there will be four coupons remaining until maturity. Calculate the full price of the bond using actual days.

Step 1: Calculate the value of the bond on the last coupon date (coupons are

semiannual, so we use 4/2 = 2% for the periodic discount rate):

N=4;PMT=25 FV = 1, 000 VY=2;CPT PV=-1,019.04

Step 2: Adjust for the number of days since the last coupon payment:

Days between June 15 and December 15 = 183 days.

Days between June 15 and settlement on August 21 = 67 days. Full price = 1,019.04 x (1.02)67/183= 1,026.46.

Is it because there are 4 coupons left? If so, why not 8? Since those coupons are semiannual?

#2

It says 4 coupons remaining right there in the question.

#3

N isn’t number of years, it’s number of coupon payments made. I’m making silly mistakes today :sweat_smile:. Well, thanks anyway!

1 Like
#4

You could also use the BOND worksheet. This will give you PRI=101.730066 and AI= 0.915301 for a total of $102.645367.