How to accurately calculate the proceeds from selling a bond
In short: Selling a bond involves more than just looking at the market price. This video demonstrates how to account for broker commissions and accrued interest to find your true total proceeds.
To determine the final amount received from a bond sale, investors must navigate several moving parts. The calculation requires factoring in the current market price alongside any broker commissions charged for the transaction.
Crucially, the video explains how to handle accrued interest using the industry-standard 30/360 day-count convention. This method is used to calculate the interest earned between scheduled payment dates, ensuring the buyer and seller split the interest correctly.
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Sources
- Summary by Intellect · source: Calculating proceeds from selling bonds | Financial mathematics (TX TEKS) | Khan Academy
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