Question

You purchase a bond with a coupon rate of 8.7 percent and a clean price of $935. Assume a par value of $1,000.

If the next semiannual coupon payment is due in two months, what is the invoice price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Invoice price

$

Answer 1

Accrued interest is the coupon payment for the period times the fraction of the period that has passed since the last coupon payment. There are two months until the next coupon payment, so four month has passed since the last coupon payment.

Accrued interest = $87/2 × 4/6

Accrued interest = $29.00

Invoice price = Clean price + Accrued interest

Invoice price = $935 + $29.00

Invoice price = $964.00