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A bond has a 5% coupon rate. The coupon is paid semiannually, and the last coupon was paid 35 days ago. If the bond has a par value of $1,000, what is the accrued interest

Respuesta :

Answer:

$4.81

Explanation:

Interest for 35 days can be calculated by multiplying the Interest with the ratio of days accrued interest days in 6 months.

DATA

Coupon rate (5% x 6/12) = 2.5%

Par value = $1,000

Days = 35

Days in 6 months = 182

NOTE: The coupon is paid semiannually (every 182 days)

Solution

Interest for 35 days = ($1,000 x 2.5%) x (35 / 182)

Interest for 35 days = $25 x  0.192

Interest for 35 days =  $4.81