- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 44. Introduction to Fixed-Income Valuation
- Subject 3. Flat Price, Accrued Interest, and the Full Price
CFA Practice Question
The bond described below is sold for settlement on April 20, 2020.
Coupon payment dates (semi-annual payments): Mar 1 and September 1
Maturity date: September 1, 2023
Day count convention: 30/360
Annual yield-to-maturity: 6%
Annual coupon rate: 10%
Coupon payment dates (semi-annual payments): Mar 1 and September 1
Maturity date: September 1, 2023
Day count convention: 30/360
Annual yield-to-maturity: 6%
The full price the bond will settle at on April 20, 2020 is closest to ______.
A. 104.02
B. 113.39
C. 108.77
Explanation: According to the 30/360 day-count convention, there are 50 days between the last coupon on March 1, and the settlement date on April 20. At the beginning of the period, there are seven semi-annual periods to maturity.
PV = 5/1.031 + 5/1.032 + ... + 105/1.037 = 112.46
Full price on April 20 = 112.46 x (1.03)50/180 = 113.39
User Contributed Comments 2
| User | Comment |
|---|---|
| sarasyed5 | why is it 50/180?? |
| simme123 | 50 days are gone since the last coupon and 180 days, because its semi-annual |