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BOND MATH: The Theory Behind the Formulas by Donald J. Smith

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A Real Corporate Bond

Figure 3.5 shows the Bloomberg Yield Analysis (YA) page for the 8 3/8% IBM bond that matures on November 1, 2019. Its flat price is 130.725 (percent of par value) for settlement on November 10, 2009. Look first at the Cash Flow Analysis section. Under Payment Invoice, the total purchase price is shown for $1,000,000 in par value (this is also the assumed redemption amount). The flat (or clean) price, here called the principal, is $1,307,250.00. The accrued interest is $2,093.75, calculated as:

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The day-count convention is 30/360, giving 9 days between the last coupon on November 1st and settlement on November 10th. The sum, ...

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