What amount of interest income will he receive on March 15, 2008? - ProProfs Discuss
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What amount of interest income will he receive on March 15, 2008?

Domenic purchases a $100,000 Government of Canada 5.75% September 15, 2015 bond for settlement on January 15, 2008. He pays the accrued interest owing as of the date of the trade.

Asked by Reagan, Last updated: Nov 26, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

The issuer has no involvement when it comes to accrued interest calculations. All the issuer does is make interest payments on the regularly scheduled interest payment dates. So when september 15 comes, the issuer pays interest to the current owner of the bond.

When march 15 comes, the issuer pays interest to the current owner of the bond. Since the question is asking about the amount paid on a regular interest payment date rather than accrued interest between investors, your only focus is on how much the issuer pays on specified interest payment dates. Accrued interest is between investors and is of no concern to the issuer who only has one task to make the regular interest payment on the specified date.

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