Question

a bond maturing on june 15, 2023 has a coupon rate of 6.40%, paid semi-annually on june 15 and december 15, and accruing according to the 30/360 day-count convention. the bond has a face value of $5,000. the bond is traded for settlement on february 13, 2021, for a flat price of 101.13. calculate the total dollar amount owed by the buyer of the bond to the seller.

Answer 1

For instance, say you own a bond with a par value of $1,000 whose current price is $900. Its coupon rate is 2% and it matures five years from now.

What is the formula of semi annual coupon?

Subtract the number of payments made each year from the yearly coupon rate. For instance, double the coupon rate by two if the bond pays every two years. To calculate the bond's coupon payment, multiply the figure by the bond's face value. Compound interest is calculated using a formula that takes into account the principal, P, the nominal interest rate, I and the quantity of compounding periods. If the interest is compounded, you would apply the formula P[(1+i)n-1] to determine the total amount of interest.

Consider the case where you now possess a $1,000 par value bond with a price of $900. It matures in five years and has a 2% coupon rate. Divide 2% of the $1,000 par value, or $20, by two to determine the semi-annual bond payment. As a result, the bond yields $10 every two years.

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