Valuing a bond between coupon payments, Financial Management

Most of the time, an investor buys a bond between coupon payments. In such transaction, the buyer must compensate the seller of the bond for the coupon interest earned from the time of the last coupon payment to the settlement date of the bond. This amount is called accrued interest. So the buyer pays the seller the agreed price plus the accrued interest. This is known as full price. The price of the bond without the accrued interest is known as clean price. The buyer recovers the accrued interest when the next coupon payment is received. 

Now we will explain how to change the PV formula to calculate the full price of a bond when it is purchased between coupon payments.

In some market it is known as a dirty price.

Posted Date: 9/10/2012 5:59:57 AM | Location : United States







Related Discussions:- Valuing a bond between coupon payments, Assignment Help, Ask Question on Valuing a bond between coupon payments, Get Answer, Expert's Help, Valuing a bond between coupon payments Discussions

Write discussion on Valuing a bond between coupon payments
Your posts are moderated
Related Questions
DISCOUNTING TECHNIQUE is also called present value technique. It is the process of calculating the present value of cash flows.  Discounting is determining the present value of a

Expalin the basic concept of financial management and Cost of Retained Earnings and External Equity??? Also explain the hoe can ew calculate the external equity? Help me

Q. What do you mean by Working Capital? Meaning of Working Capital:- Working capital management is a significant aspect of financial management. In business money is necessar

1. How would you judge the potential profit of Bajaj Electronics on the first year of sales to Booth Plastics and give your views to increase the profit?

1. Allocate resources to different departments by taking information from previous financial data. 2. What would be the estimated cost of new allotted resources to be included i

The financial institutions that originate the loans sell a pool of cashflow-producing assets to a specially created third party that is called a

Q. Explain Dividend Policy Decision? Dividend Policy Decision: - The financial management has to make a decision as which portion of the profits is to be distributed as dividen

Contractual savings institutions Contractual savings institutions obtain funds at periodic intervals on a contractual basis. The industry is classified into two main groups ins

Explain about the market-based and bank-based systems. A clear distinction between market-based in USA and UK and bank-based systems as in Germany, Japan and France define by s

WHAT ARE THE MAIN VIEWS OF WACC PREVALENT IN THE FINANCIAL MANAGEMENT LITERATURE