On 12 June 2019, Citibank has purchased 220 units of 5.50% p.a. 15-year Exchange Fund Note (EFN)
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Question:
(a) Draw a diagram for the above bond transaction from 29 March 2019 (last interest payment date) to 30 September 2019 (next interest payment date). Indicate the dates, time and events involved during the specified time period.
(b) With a par value of HKD50,000 per unit and 365 days in a year calculation. i. Assess the total amount of accrued interest HSBC should receive for selling EFNs to Citibank. ii. Ignoring transaction cost, evaluate the lump sum which Citibank should 2 pay to HSBC on the settlement date for the purchase of the EFNs.(c) On 30 September 2019, the Exchange Fund paid the second coupon interest to EFN holders. i. Find out the amount of coupon interest Citibank received on that day. ii. Exclude the accrued interest previously paid to the seller (HSBC) on settlement date (12 June), assess the net amount of coupon interest income entitled by Citibank.
Related Book For
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
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