Question

Amount issued $400 million Offered Issued at a price of 101.50% plus accrued interest (proceeds to company 101.300%) through First Boston Corporation. Interest 9.25% per annum, payable February 15 and August 15. Suppose the debenture was issued on September 1, 1992, at 101.50%. How much would you have to pay to buy one bond delivered on September 15

Answer 1

Answer: $1022

Explanation:

The amount that would be paid buy one bond delivered on September 15 will be the addition of the issued price and the accrued interest. This will be:

= (1000 x 101.50%) + (1000 x 9.25% x 1/12)

= (1000 x 101.50/100) + (1000 x 9.25/100 x 1/12)

= (1000 x 1.015) + (1000 x 0.0925 x 0.0833)

= 1015 + 7.70525

= 1022

The answer is $1022.