On May 1, Emerson Fast bought 10 Manitoba On May 1, Emerson Fast bought 10 Manitoba Polar bonds with a coupon rate of 7.875%. The
purchase price was $101. 375, and the commission was $8 per bond. Manitoba Polar bonds pay
interest on April 1 and October 1.
Polar bonds with a coupon rate of 7.875%. The
purchase price was $101. 375, and the commission was $8 per bond. Manitoba Polar bonds pay
interest on April 1 and October 1.
how do you find the time for the bond?
To find the time for the bond, you need to determine the number of interest payment periods left until the bond matures. In this case, Manitoba Polar bonds pay interest on April 1 and October 1, so there are two interest payment periods per year.
First, calculate the total number of years until the bond matures by dividing the purchase price by the annual coupon payment:
Annual coupon payment = coupon rate * purchase price = 7.875% * $101.375 = $7.98
Number of years until bond matures = purchase price / annual coupon payment = $101.375 / $7.98 ≈ 12.672 years
Next, calculate the number of interest payment periods remaining by multiplying the number of years until maturity by the number of interest payment periods per year:
Number of interest payment periods remaining = number of years until bond matures * number of interest payment periods per year = 12.672 * 2 = 25.344 periods
Therefore, the time for the bond is approximately 25.344 interest payment periods.