SOA #50

[tbug]

A 1000 bond with semi-annual coupons at i(2)=.06 matures at par on October 15, 2020. The bond is purchased on June 28, 2005 to yield the investor i(2)=.07. What is the purchase price?

Here's what I put into the BAII+

SDT= 6-28-2005
CPN = 60
RDT = 10-15-2020
RV = 1000
2/Y
YLD = 7
and after computing, PRI = 906.8833363 is the answer given. Correct answer is 919 (and 907 is also an answer choice, which of course I chose.)

What am I doing wrong? (I've only been using the calculator to figure these out for a few days)

[MyKenk]

906 is the price immediately after the coupon payment made on april 15th of that year. you need to add to that a partial coupon payment, using simple interest, as stated in the question: 906.32[1+[179-105]/[288-105]*.035] = 919.15

[tbug]

So the calculator always gives the flat price?

[MyKenk]

i believe so, yes.

[Buzz Lightyear]

Yes. If you press the down arrow again you get the accumulated interest, which is 12.16 approx. Added together you get 919.

[chekat]

Originally Posted by tbug

So the calculator always gives the flat price?

PRI gives the market price. If you scroll down once more after PRI, there's a tab called AI (accrued interest). You can add PRI+AI to get the flat price and the answer.


EDIT: Buzz beat my reply by 1 minute!

[tbug]

Oh! Thanks! You guys are so great

[Buzz Lightyear]

Originally Posted by chekat

PRI gives the market price. If you scroll down once more after PRI, there's a tab called AI (accrued interest). You can add PRI+AI to get the flat price and the answer.


EDIT: Buzz beat my reply by 1 minute!

It's the quick and the dead around here 'kat!

[MyKenk]

Originally Posted by Buzz Lightyear

Yes. If you press the down arrow again you get the accumulated interest, which is 12.16 approx. Added together you get 919.

Huh. Learn something new everyday. I could have sworn that had something to do with the BA2+'s artificial intelligence. My calculators not the only one that talks, is it?

[Buzz Lightyear]

Originally Posted by mykenk

Huh. Learn something new everyday. I could have sworn that had something to do with the BA2+'s artificial intelligence. My calculators not the only one that talks, is it?

Saves doing all that math type stuff.