In: Finance
A coupon bond paying semiannual interest is reported as having an ask price of 85, paying on the 1st of January and July. If today is Feb. 5th, and the annual coupon rate is 4%, what is the invoice price? Round to the nearest penny.
Accrued Interest = Coupon × (Days Since Last Coupon / Days in Current Coupon Period)
= [(4%/2)*$100] x [36/181]
= $2 x 0.1989 = $0.40
Clean Price = Quoted Price = Ask Price
Dirty Price = Invoice Price = Clean Price + Accrued Interest
= $85 + $0.40 = $85.40