Homework Answers
1) Calculation of Dirty Price :
Price Quote for bond= $ 98.15
* It is assumed that this price is quoted for bond only and interest not included in it
Interest for 63 days = $ 100* .08*63/365 =$ 1.381
Dirty Price = 98.15 + 1.381 = $ 99.531
2)
Yield to maturity( YTM)
Price Quoted = $ 98.15
Interest Price = $ 1.381
Amount paid = 99.531
Value of amount paid 63 days back i. e. 01/05/2015 = 99.531* ( 1/1+.08/365*63) = $ 98.176
YTM: - (Interest/2+ ( Redemption value - Paid )/n*2)/Paid = (8/2+(100-98.176)/10*2)/98.176 = (4+.09)/98.176 = 4.166 %
YTM(per annum) = 4.166 *2 = 8.332 %
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