Question

Consider the bond below.
A semi-annual coupon paid March 31 & September 30:
Par Value $1000 ; Coupon rate7%; Purchase date 6/30/2020; Yield to maturity 9%; Final maturity date 3/31/2025

1. What is the clean price if the bond was purchased on June 30, 2020?

2.What is the full invoice price if the bond was purchased on June 30, 2020?

Answer 1

1

Clean price is bond price on March 31, 2020 immediate last coupon.

Particulars	Cash flow	Discount factor	Discounted cash flow
present value Interest payments-Annuity (4.5%,10 periods)	$                         35.00	7.91272	$                276.95
Present value of bond face amount -Present value (4.5%,10 periods)	$                    1,000.00	0.64393	$                643.93
Bond price			$                920.87

Clean price is 920.87

2

Invoice price = clean price + accrued interest = 920.87 + 1000*7%*3/12 = 938.37

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