Explanation:
To find the clean price, subtract the accrued interest from the dirty (full) price. Based on the options, the yield assumes a 0.75% annual YTM, resulting in a 0.375% semiannual yield.
$35 coupon every 6 months. There are 3 remaining coupon periods from August 1, 2020, to maturity (Feb 1, 2022) PLUS the upcoming coupon on August 1, 2020.. Number of days between previous coupon (Feb 1, 2020) and settlement (July 20, 2020) based on 30/360 day count: $Days = (7 - 2) \times 30 + (20 - 1) = 150 + 19 = 169 \text{ days}$ Number of days to next coupon = 4. Accrued Interest (AI): $AI = 35 \times \frac{169}{180} = 32.86Dirty Price_{July 20} = \frac{1128.07}{(1.00375)^{\frac{11}{180}}} = 1127.81$6. Clean Price:
Clean Price = Dirty Price - AI = 1127.81 - 32.86 = 1094.95 \approx \`1`,094.93$Ultimate access to all questions.
Q.46 Alphabet has $200 million worth of bonds payable outstanding. The $1,000 par, 7% semiannual coupon bonds will mature on February 1 2022. The coupon dates are February 1 and August 1. They follow the 30/360-day count convention, and the next coupon is due on August 1 2020. Linda Smith bought 1,000 such bonds from Robert Piers on July 20 2020 when the bonds' semiannual yield was 0.75%. The market requires the buyer to compensate the seller for the accrued interest. The clean price of the bond is equal to:
A
$985.25.
B
$1,000.00
C
$1,094.93.
D
$1,090
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