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YouTube T4-22: Fixed Income: Bond's full/flat price on settlement date

Nicole Seaman

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The example follows Bruce Tuckman's example 1.3. The bond settles on June 1st. The previous coupon was paid on February 15th and the next coupon is paid on August 15th; so it has been 106 days since the last coupon and 75 days until the next coupon. The bond matures in about 9.21 years, and has a 3 5/8 coupon (i.e., 3.625%). First, we price the bond on the last coupon date (Feb 15th) when it's FULL price was $102.8926, then we coupon forward at the yield to retrieve the FULL price on the settlement date ($103.8740). Finally, we subtract the accrued interest of $1.061 to obtain the FLAT price ($102.8126) on the Settlement date.

David's XLS is here: https://trtl.bz/2YwsSmQ

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