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Previous coupon payment

Bonds – Cum or ex interest?. 28 Feb 2012. 30 April 2012. 30 Nov 2011. 31 May 2012. Transaction date. Previous coupon payment . Register closes. Next Coupon payment. On 28 Feb 2012: Bank B ( selller ) Company D (buyer) Who holds this bond on the register closing date?

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Previous coupon payment

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  1. Bonds – Cum or ex interest? 28 Feb 2012 30 April 2012 30 Nov 2011 31 May 2012 Transaction date Previous coupon payment Register closes Next Coupon payment On 28 Feb 2012: Bank B (selller)Company D (buyer) Who holds this bond on the register closing date? Who will receive the full coupon? But from 30 Nov 2011 to 28 Feb 2012 the bond belonged to Bank B, (the seller), So Bank B, (the seller)has to receive accrued interest for the period from 30 Nov 2011 to 28 Feb 2012 (90 days) Add accrued interest to clean price , to compensate Bank B All in price = Clean price + Accrued interest for 90 days Thus this bond trades Cum interest on 28 February 2012 Company D (buyer) Company D (buyer)

  2. Bonds – Cum or ex interest? 30 April 2012 30 Nov 2011 31 May 2012 20 May2012 Transaction date Previous coupon payment Register closes Next Coupon payment On 20 May 2012: Bank A (selller)Bank B (buyer) Who holds this bond on the register closing date? Who will receive the full coupon? But from 20 May 2012 to 31 May 2012 the bond belonged to Bank B, (the buyer), So Bank B, (the buyer), has to receive accrued interest for the period from 20 May 2012 to 31 May 2012 (11 days) Subtractaccrued interest from clean price , to compensate Bank B All in price = Clean price—Accrued interest for 11 days Thus this bond trades Ex interest on 20 May 2012 Bank A (seller) Bank A (seller)

  3. Bonds – Cum or ex interest? 30 Nov 2011 30 April 2012 31 May 2012 Previous Register Next coupon closes coupon payment payment If bond trades from 30 April to 31 May: Bond belongs to seller on register closing date. Seller will receive all interest Buyer must be refunded Ex interest If bond trades from 30 Nov to 30 April: Bond belongs to buyer on register closing date. Buyer will receive all interest Seller must be refunded Cum interest

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