Answer to Question #208112 in Financial Math for Beauty Magadlela

Question

The next coupon date that follows the settlement date of a bond is 28 October 2021. The half-yearly coupon rate is 7,375%. The accrued interest equals R5,49589%. If this is a cum interest case, the settlement date for this bond is

[1] 11 September 2021.

[2] 14 June 2021.

[3] 30 July 2021.

[4] 29 August 2021.

[5] none of the above

Answer 1

Bonds are the financial instruments that are issued by companies that allow the investors to invest in their company. The company invests the shares of bondholders on their behalf. It carries interest rate and maturity.

In the case of cum interest, the settlement date is calculated between the last coupon date and the last settlement date. As the next coupon date is given and it's mentioned that it's a half-yearly payment, the settlement date is assumed to be in June. 

"Answer: Settlement date is 14th June 2021."