CFA Level 1 | Fixed Income: Full Price, Flat Price, Accrued Interest

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CFA Level 1
Topic: Fixed Income
Reading: Introduction to Fixed-Income Valuation

To calculate the full price of a bond:
1) Compute the present value of the bond up to the previous coupon period (before the settlement date)

2) Calculate the number of days between last coupon period to settlement date (t) and the number of days between coupon periods (T).

3) Calculate the future value of the bond value in Step 1 up to the settlement date using the YTM per period and the fraction t/T

To get the flat price, subtract the accrued interest from the full price.

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