You purchase a bond with a coupon rate of 5.3 percent and a clean price of $951. Assume a par value of $1,000. If the next semi annual coupon payment is due in two months, what is the invoice price?

Question

Alexander Strickland

Business

23 September, 03:39

You purchase a bond with a coupon rate of 5.3 percent and a clean price of $951. Assume a par value of $1,000. If the next semi annual coupon payment is due in two months, what is the invoice price?

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Answers (1)

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Damaris Cohen · Answer 1

The invoice price is $ 969.

Explanation:

This question requires us to tell the invoice price (dirty price) of the bond. Clean price is given in the question. So we can easily calculate invoice price by adding accrued interest in dirty price. Detail calculation is given below.

Clean price = $ 951 - A

Accrued Interest = (5.3% * 1000) / 12*4 = $ 17.67 - B

Invoice price = A+B = $ 969 (approx)