John will purchase a bond with a face value of $1,000.00. The quoted price is 118. The coupon rate is 5% and 79 days have passed since the last coupon payment.

How much should John be willing to pay for the bond?

To calculate how much John should be willing to pay for the bond, we need to factor in both the quoted price of the bond and the accrued interest for the 79 days since the last coupon payment. Here's a step-by-step explanation:

### Step 1: Calculate the Quoted Price
The bond's face value is $1,000, and the quoted price is 118, which means the bond is being sold at 118% of its face value.

\[
\text{Quoted Price} = 118\% \times 1,000 = 1,180.00
\]

### Step 2: Calculate the Annual Coupon Payment
The coupon rate is 5%, so the annual interest payment (coupon payment) is:

\[
\text{Annual Coupon Payment} = 5\% \times 1,000 = 50.00
\]

### Step 3: Calculate the Daily Interest
Since the bond pays interest annually, we can calculate the daily interest by dividing the annual coupon payment by the number of days in a year (assuming a 365-day year):

\[
\text{Daily Interest} = \frac{50}{365} \approx 0.13699
\]

### Step 4: Calculate the Accrued Interest
John will need to pay the seller for the interest that has accrued over the 79 days since the last coupon payment:

\[
\text{Accrued Interest} = 79 \times 0.13699 \approx 10.82
\]

### Step 5: Calculate the Total Price John Should Pay
John will need to pay the quoted price plus the accrued interest:

\[
\text{Total Price} = 1,180.00 + 10.82 = 1,190.82
\]

### Final Answer:
John should be willing to pay **$1,190.82** for the bond.

---

Would you like further details or have any other questions about this problem?

Here are some related questions to deepen your understanding:
1. What would the total price be if the bond had a different face value?
2. How would the total price change if 100 days had passed instead of 79?
3. How is the quoted price of a bond determined in the market?
4. What happens if the bond is quoted at a discount instead of a premium?
5. How would John’s payment be different if the coupon rate was semi-annual instead of annual?

**Tip:** When purchasing bonds, always account for accrued interest, especially if you're buying between coupon payment dates.

John will purchase a bond with a face value of $1,000.00. The quoted price is 118. The coupon rate is 5% and 79 days have passed since the last coupon payment. How much should John be willing to pay for the bond?

This problem involves calculating the total price John should pay for a $1,000 bond with a 5% coupon rate. The bond is quoted at 118% of its face value, and 79 days have passed since the last coupon payment. The solution walks through key finance math concepts, including accrued interest, coupon rates, and bond pricing.

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