Final answer:
Domenic will receive $976.78 in interest income on March 15, 2021.
Step-by-step explanation:
The interest income that Domenic will receive on March 15, 2021 can be calculated using the formula:
Interest income = Face value of bond × Annual coupon rate × Fraction of the year the bond was held
Given that Domenic purchased a $100,000 government of Canada 5.75% September 15, 2035 bond for settlement on January 15, 2021 and pays the accrued interest owing as of the date of the trade, we can calculate the interest income for the period from January 15, 2021, to March 15, 2021.
First, calculate the fraction of the year the bond was held:
Fraction of the year = (Number of days the bond is held) ÷ (Number of days in the year)
Next, plug in the values into the formula:
Interest income = $100,000 × 5.75% × (Fraction of the year the bond was held)
Calculating the fraction of the year:
January 15, 2021 to March 15, 2021 = 60 days (Leap year)
Total days in the year = 366 days (Leap year)
Fraction of the year = 60 ÷ 366
Interest income = $100,000 × 5.75% × (60 ÷ 366)
Therefore, the interest income Domenic will receive on March 15, 2021 is $976.78.