You purchase a bond with a coupon rate of 7.6 percent and a clean price of...

You purchase a bond with a coupon rate of 7.6 percent and a clean price of $1,010. If the next semiannual coupon payment is due in four months, what is the invoice price? 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 4 months until the next coupon payment, so 2 month has passed since the last coupon payment.

Accrued interest = $76/2 × 2/6

Accrued interest = $12.67

Invoice price = Clean price + Accrued interest

Invoice price = $1,010 + $12.67

Invoice price = $1,022.67

jeff jeffy answered 2 years ago

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