Calculate accrued interest assuming the bond

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Reference no: EM131956517

Use the Excel spreadsheet Bond Price-Yield Calculator to answer these questions. However, you should try to replicate some of the calcuations by hand with your personal calculators to help learn the concepts. Make sure you think through the intuition behind the calculations and make sure you understand why the answers are what the Excel spreadsheet produces.

(1) A 4.50% coupon bond matures on 8/15/2023. The settlement date for the trade is 5/26/2017. The issue date was 8/15/2013. The first coupon date was 2/15/2014. The face value owned is 100,000. The bond pays coupons semiannually.

(a) Calculate accrued interest assuming the bond is a U.S. Treasury bond.

(b) Calculate accrued interest assuming it is a U.S. domestic corporate bond.

(c) Why are the results different?

(d) Calculate the yield to maturity for the above security, assuming it is a U.S. Treasury bond priced at 99.25. Explain why it is above or below the coupon rate.

Reference no: EM131956517

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