- 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

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**CFA Practice Question**

The ex-coupon transaction price is 133-5/32 for a semi-annual pay, 12-3/8% coupon bond. Five months have elapsed since the last coupon. The bond is trading. What is the full price for $1,500,000 par value of this bond?

B. $2,074,688

C. $2,090,156

A. $1,997,344

B. $2,074,688

C. $2,090,156

Correct Answer: A

The designation "ex-coupon" indicates that the bond buyer does not receive the next coupon payment. The bond seller is entitled to the entire coupon payment. The full price is the price indicated and it

**already**includes the accrued interest: (.01) x (133 5/32) x $1,500,000 = $1,997,343.75.###
**User Contributed Comments**
19

User |
Comment |
---|---|

wldu |
(0.01) where does this number come from? |

stefdunk |
133 5/32 is the price in percent compared to par. therefore the price is 133 5/32 x .01 x par. |

danlan |
Pay attention to "ex-coupon" |

antarctica |
ex-coupon transaction price means the price that already takes into account coupon paid to the seller -> another term for full price |

rickeling |
ex-coupon price has nothing to do with full price here. It just means that the seller gets the accrued interest. |

thanks |
As stefdunk mentioned...133 5/32 is the price in percent compared to par, therefore 133 5/32 x .01 x par = 133 5/32% x par |

southeuro |
very good point by thegodfather. |

southeuro |
value to the buyer EXcludes the accrued interest if traded. but value INcludes the accrued interest for the bondholder if he intends to keep it. That's my take on it. Am I wrong? |

gulfa99 |
i think cfa should be more logical and given questions from real life. When i buy a bond in real life after due coupon i have to compensate the seller for the accrued interest t+3 - the last coupon date. and when i sell the bond, the buyer will compensate me for the accrued interest. |

johntan1979 |
Ex coupon price QUOTED at 133-5/32, meaning this IS the agreed and transacted full bond price. Seller gets to keep the entire coupon payment regardless of how much time has passed. This is the difference with question 1, where you only get an ex coupon price ($225,990), not a bond quote. |

johntan1979 |
Technically, the question should ask what is the clean price, not full price. Full price = agreed price + accrued interest Clean price = agreed price |

gill15 |
Well the Agreed price is the full price because accrued interest = 0 |

gill15 |
And SouthEuro has got it right....tricky questions |

Emma100 |
could someone explain where 0.01 is from |

Shaan23 |
Yup Johntan has it right. When Ex Coupon - buyer does not receive the coupon so accrued interest is not relevent. Equation for Full price = Clean Price + accrued interest but for Ex coupon accrued interest = 0 |

floydtrend |
@Emma100 check stefdunk's comment. |

angusmyers |
0.01 is 1/100. Transaction price is 133-5/32 for every $100 worth of bond. They are merely converting to get a transaction price for every $1 of bond. |

sarasyed5 |
what does 133-5/32 mean? can someone please explain |

sarasyed5 |
ah i get it now!! its whole number, i have to convert it into decimal |