Question

A 20-year bond with a $1,000 face value was issued with a yield to maturity of 4.3% and pays coupons semi-annually. After ten years, the yield to maturity is still 4.3% and the clean price of the bond is $959.71. After three more months go by, what would you expect the dirty price to be?

Answer 1

Dirty Price 970.46

Step-by-step explanation:

The dirty price will include the accrued interest along with the present value of the bond:

1,000 x 0.043 x 3/12 = 10.75 accrued interest

So we add up the clean price of 959.71 with the 10.75 accrued interest in the three-month period we got the dirty price.