CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

A bond is trading at an ex-coupon transaction price that is 99 7/32 for a semi-annual pay, 9 5/8% coupon bond. Four months have elapsed since the last coupon. What is the accrued interest for the buyer for $2,750,000 par value of this bond?
A. $88,229
B. $110,286
C. $0
Explanation: 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. Consequently, there is no accrued interest for the buyer for this transaction.

User Contributed Comments 15

User Comment
Cata Tricky! READ the question!
cblondel Isn't there interest even if the buyer does not receive it?
ehc0791 Good. taught me something new.
ruckmani good question!
Criticull Dang, tricksters. Good one.
Criticull If it was not ex-coupon, what would the answer have been?
Mak900 Then it would be option A = 88229
Andrewua Great, tricky!
ciji good problem
xanados It's trading at the ex-coupon price. And why would it? Bonds don't trade ex-coupon, until near the coupon date!
kellyyang Help with me these # 99-7/32, 9-5/8%. I am not actually sure for the meaning.
jerasmus kellyyang:

This means the bond was traded at $99.21875 per $100 of par with a coupon rate of 9.625%. US bonds are sometimes priced in 32ths of a dollar and interest rates quoted in 8ths of a percentage.
yekky Great question, good thing I read it over 3 times and saw the Ex-coupon! Thanks Jerasmus for clearing up the representation of the coupon and interest rate figures.
meeravenk 99-7/32 is 9+(7/32) = 9.21875 and similarly 9-5/8 is 9+(5/8) = 9.625. It is just a way of quoting terms without using long drawn or worse, rounded off decimals.
sahilb7 Woah!! Nice Question!
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