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15 October, 19:17

Today, you are buying a $1,000 face value bond at an invoice price of $987. The bond has a coupon rate of 6 percent and pays interest semiannually. There are two months until the next coupon date. What is the clean price of this bond?

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  1. 15 October, 19:41
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    clean price is $967

    Explanation:

    given data

    face value = $1000

    invoice price = $987

    rate = 6 % = 3% semiannually

    to find out

    clean price

    solution

    we know here two months until the next coupon date so time is for 4 month

    so clean price will be calculated as

    clean price = bond price - Interest accrue ... 1

    Interest accrue = 1000 * 3% * 4/6

    Interest accrue = $20

    so from equation 1

    clean price = 987 - 20

    clean price is $967
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