### CFA Practice Question

There are 490 practice questions for this study session.

### CFA Practice Question

The cum-coupon transaction price is 98-7/32 for a semi-annual pay, 7-3/8% coupon bond. One and a half months have elapsed since the last coupon payment. What is the accrued interest for \$1,000,000 par value of this bond?

A. \$6,145.83
B. \$9,218.75
C. \$12,291.67

Accrued interest = (1.5/6.0) x (1/2) x (7 3/8%) x \$1,000,000 = \$9,218.75

User Comment
cgeek (7 3/8%) ?
kalps yes it is standard convention
danlan Use face value instead of the market value
(98-7/32)
Done (7 3/8) = 7.375%
lijia1 what does '98-7/32'and '7-3/8%'mean?
shinyman 98-7/32 = 98 + 7/32 and 7-3/8 = 7 + 3/8
ashok1959 Better way is 1000000*.07375 divided by 12 and mutiply by 1.5 = 9218.75
NavdeepS transaction price of a bond is irrelavent to the interest
euniceyew why we have to use 1.5/6 instead of using 4.5/6 ?
fedha Because 1.5 months have elasped since the last coupon pymt and 6.0 because is semiannual pay
gazza77 3/8 is a standard convention just like half a furlong or an eight of a chain is. Join the rest of the sane world and use the metric system people
Rchan89 what is the significance of the 98 in this problem?
gulfa99 par value of the bond is 100
coupon is paid on par value
98.375% of 100 has no significance when calculating accrued interest.
98.375 has significance when you calculate current yield or YTM.
michlam14 the stock market prices are quoted in fractional points
pranubal why 98 -7/32 is there, if gulfa99 explanation is right, then why par value is mentioned as \$1,000,000
robbiecow its there for obfuscation
ibrahim18 Don't be confused with the transaction price. It has no link with the interest.