You purchase a bond with an invoice price of $1,240. The bond has a coupon rate...

You purchase a bond with an invoice price of $1,240. The bond has a coupon rate of 8.4 percent, and there are 3 months to the next semiannual coupon date. What is the clean price of the bond? Assume a par value of $1,000.

Expert Solution

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 3 months until the next coupon payment, so 3 month has passed since the last coupon payment.

Accrued interest = $84/2 × 3/6

Accrued interest = $21.00

Clean price = Dirty price – Accrued interest

Clean price = $1,240 – $21.00

Clean price = $1,219.00

jeff jeffy answered 2 years ago

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