DN

N
ITO PRINCIPLE A
DIVISION FO TOTAL PURCHASE AMOUNT N I TEREST
O
n Purchase fo Debenturesni hte open market,he company si requiredot payot hte Seelreht
following two paymen
ts:
.1 the payment made towards Principal.
2. hte payment made towards Interest accruedom
rf hte last due daet fointerestot hte edal
of purchase.
C
U
M INTEREST PRC
IE QUOTATO
IN A
N IE QUOTATO
D EX-INTEREST PRC IN
There are w
t o ways of expressing the price quotations:
.1 Cum Interest Price: If hte interest accrued orm
f hte last due date of interest ot hte deat
fotransaction si included ni hte prcie quoted, ti is caulesd, Cum-Interest prcie whcihsihet
h
total amount paid for the purchase of debentures. T
Cum-Interest Price = Payment otwards Princifptran
al + Payment towards Interest accrued
saction.
o
from the last due date of interest ot the date

Fansac ros no i
tc t
ie ni e
ht por eur
om e
,ht s
l
at dei
ler i
nns
e t
he d
a
d e
Ex-Interest Price = Payment towards Principal
The payment towards Principal, payment towardsf Interest and total amount paid for hte purchase
of Debentures may be calculated with hte help o following table:
Price Quotation Payment towards Payment towards Total Amount
Interest
Principal Paid

D= B+C
Cum-Interest I = [Nominal Value x C = Cum-Interest Price Cum-Interest
-Interest Price
Rate/100 x Period/12]
I = [Nominal Value x C = Ex-Interest Price Ex-Interest Price
II. Ex-Interest + Interest
Rate/100 × Period/12]
TUTORIAL NOTES
nce to the quotation price
1. Brokerage (if any payable) is always calculated with refere
(whether cum-interest or ex-interest) of the transaction.
of hte
2. Interest is always calculated with reference to the face value (or nominal value)
debentures.
quotation in
3. Unless otherwise stated, the price quotation wil be treated as 'Cum-interest'
case of debentures issued by companies.

F EX-INTEREST QUOTATION]
ILLUSTRATION 22 [IN CASE O
Calculate the Total amount paid for the purchase of debentures ni each of the following
alternative cases:
Case (a) On 1st Jan, XLtd. purchased 300, 12% Debentures of 7 100 each at 7 93 ex-interest.
The interest si payable half yearly on 30th June and 31st December.
Case (b) On 1st May, XLtd. purchased 300, 12% Debentures of $ 100 each ta 793 ex-interest.
The interest si payable half yearly on 30th June and 31st December.
Case (c) On 30th June, X Ldt. purchased 300, 12% Debentures of 7 100 each at 739 x-e
interest. The interestsi payable half yearly on 30th June and 31st December.