A government bond pays coupons at an annual rate of 6%. It has a nominal value of K100 and it will be redeemed at this nominal value in five years' time. Coupon payments are made every year on 31 December and the bond settles on a T+1 basis. The government bond has a clean price of K97.28 on 30 September 2018. An investor wishes to buy this bond on 30 September 2018. Required: Calculate the dirty price of the government bond on 30 September 2018, which is the price at which the bond will be bought by the potential buyer.
A government bond pays coupons at an annual rate of 6%. It has a nominal value of K100 and it will be redeemed at this nominal value in five years' time. Coupon payments are made every year on 31 December and the bond settles on a T+1 basis. The government bond has a clean price of K97.28 on 30 September 2018. An investor wishes to buy this bond on 30 September 2018. Required: Calculate the dirty price of the government bond on 30 September 2018, which is the price at which the bond will be bought by the potential buyer.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A government bond pays coupons at an annual
rate of 6%. It has a nominal value of K100 and it
will be redeemed at this nominal value in five
years' time. Coupon payments are made every year
on 31 December and the bond settles on a T+ 1
basis. The government bond has a clean price of
K97.28 on 30 September 2018. An investor wishes
to buy this bond on 30 September 2018. Required:
Calculate the dirty price of the government bond
on 30 September 2018, which is the price at which
the bond will be bought by the potential buyer.
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