Identifier: C2T5L3 | Revision: 2026-10-26

Decision and objectives

A Eurobond quote of 102.25 is a price per 100 nominal, not USD 102.25 for the whole position and not a 2.25% yield. Convert it to dirty cash before approving an order. Apply the issue's accrual convention rather than importing the domestic bond convention from a different series.

Objectives: Calculate foreign-currency accrued coupon; Reconcile the settlement debit; Build a holding-return cash ledger.

Prerequisites: C2T5L2.

Mechanics

The buyer pays the seller for the security and ordinarily for accrued coupon earned through settlement. The buyer then receives the next full coupon if entitled under the issue's rules. This creates a timing distinction: a cash coupon can be large shortly after purchase without all of it representing investment income since purchase. A total-return ledger records dirty entry cash, coupon cash and dirty exit cash on their dates.

Price and return drivers

Clean price + accrued per 100 = dirty price when the quoted issue uses that convention. For the explicitly supplied regular ACT/ACT-style fraction, accrued per 100 = half-year coupon per 100 × elapsed days / full coupon days. Other issues may specify 30/360, actual/365 or another convention; do not approximate from the calendar month count.

Investor outlay = face × dirty / 100 + separate entry costs. Holding return = (net sale cash + coupons and reinvestment received − outlay) / outlay. Match currency and exclude external contributions. If coupons are converted into TRY on different dates, compute each conversion separately.

Worked case

Hypothetical USD bond: face USD 20,000; annual coupon 6%, regular semiannual payments; clean ask 102.25; 45 elapsed days of a stated 180-day period; buyer receives next coupon. Accrued per 100 = 3 × 45/180 = 0.75. Dirty = 103.00; gross cash USD 20,600. Hypothetical entry commission USD 20 gives debit USD 20,620. No financing, taxes or currency conversion.

Hold until the next coupon 135 days later, receive USD 600, then sell immediately after payment at clean=dirty bid 101.00 with sale fee USD 20. Net sale cash = USD 20,180. Total received = 20,180 + 600 = USD 20,780. Net gain = USD 160; holding return = 160 / 20,620 = 0.7759%. The coupon alone, 600 / 20,620, would overstate performance because price fell and purchased accrued interest was part of the outlay.

Adverse case

If the post-coupon bid is instead 96.00, net sale cash = USD 19,180; adding coupon gives USD 19,780. Loss = USD 840; return = −4.0737%. The positive coupon does not prevent a total loss. Selling just before rather than just after the coupon requires the correct dirty exit amount and entitlement; do not count both a full accrued exit amount and a coupon the seller will not receive.

Practical use

Confirm the dealer's price side, accrued convention, value date, minimum increment and size actually quoted. Identify any payment or custody charge separate from commission. Where a dealer offers an all-in cash price, ask for the clean/accrued reconciliation rather than add presumed accrual again. Store acquisition and income dates for tax. The explicit zero-tax arithmetic is a teaching cash ledger, not a Turkish Eurobond tax conclusion.

Decision boundaries

A direct issue can fit a specific USD cash date when denomination and issuer exposure fit. A near coupon can create an illusion of high income; compare net wealth from the actual purchase date. Decline if the cash debit cannot be reproduced or coupon entitlement is uncertain. Model value does not guarantee the early-sale bid assumed in a scenario.

Practice and references

Exercise: hypothetical USD 10,000 face, 8% annual coupon paid semiannually, clean 97.80, 90 of 180 days accrued, commission USD 15. Answer: accrued per 100 = 4×90/180 = 2; dirty = 99.80; gross debit USD 9,980; total USD 9,995. Next full coupon is USD 400, of which USD 200 was paid as accrued to the seller. No tax, FX or other costs.

Takeaway: use dirty cash and the complete coupon/exit ledger to measure an investor's result.

Reference guide: turkish-eurobond, dirty-price, accrued-interest, debt-holding-return, Accrued interest, Dirty price.

Next: C2T5L4. Topic test: C2T5.

Primary sources (checked 2026-10-26; changing terms require a publication recheck): Borsa Istanbul Debt Securities Market products — Public Debt Instruments; Private Sector Debt Instruments; Lease Certificates; Eurobonds; Borsa Istanbul announcement amending Debt Securities Market Procedure — 9.1.5; Annex 1; quotation and settlement price distinctions.

Shared reference guide