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

Nicole Seaman

Director of FRM Operations
Staff member
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:

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