CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

The bond described below is sold for settlement on April 20, 2020.

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
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