Consider a bond with a settlement date of February 22, 2010, and a maturity date of March 15, 2018. The coupon rate is 5.5%. If the yield to maturity of the bond is 5.34% (bond equivalent yield, semiannual compounding), what is the list price of the bond on the settlement date?

What is the accrued interest on the bond? What is the invoice price of the bond?

Now suppose the bond in the previous question is selling for 102. What is the bond’s

yield to maturity?

What would the yield to maturity be at a price of 102 if the bond paid

its coupons only once per year?

A) list price = 101.71

B) accrued interest = 0.6391

C) invoice price = 101.349

Explanation:

Given data:

semi annual coupon rate = 5.5%

semi-annual yield to maturity rate = 5.34 %

A)

i) Determine the list price of the bond

first calculate the semi-annual coupon = 5.34 % * face value = 5.5% * 100 = 5.5

list price of Bond = 101.71

attached below is the detailed solution

where :

C = 5.5

YTM / 2 = 0.534

t = 8

F = 100

B ) what is the accrued interest/income on the bond

= ( accrued interest rate / 2 ) * ( days between ask price date and last interest payment / coupon period )  * ask price

= 5.5% * ( 21/ 182 ) * 100.71

hence accrued interest = 0.6391

C ) Determine The invoice price of the Bond

Invoice price = ask price + accrued income

                      = 100.71 + 0.6391 = 101.349

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