- CFA Exams
- CFA Exam: Level I 2021
- 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 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?

B. $9,218.75

C. $12,291.67

A. $6,145.83

B. $9,218.75

C. $12,291.67

Correct Answer: B

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

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**User Contributed Comments**
17

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. |