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3 July, 14:29

The bond has a coupon rate of 6.83 percent, it makes semiannual payments, and there are 4 months to the next coupon payment. A clean price of $1,049 and the par value is $1,000. What is the invoice price

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  1. 3 July, 14:48
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    The invoice price for the bond is $1,060.38

    Explanation:

    Given the following:

    PV = Par value = $1,000,

    CV = Clean Price = $1,049

    Coupon Rate per annum = 6.83%

    To calculate the Semiannual Coupon Rate = Coupon Rate per annum/2 = 3.415%

    To calculate Semiannual Coupon = Semiannual Coupon Rate*PV

    = 3.415% * $1,000 = $34.15

    With an interest accured over 2 months, we calculate it thus:

    Accrued Interest = $34.15 * 2/6 = $11.38

    To calculate Invoice price:

    Invoice Price = CP + Accrued Interest

    Invoice Price = $1,049.00 + $11.38

    Invoice Price = $1,060.38
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