Question

The bond has a coupon rate of 6.77 percentit makes semiannual

payments, and there are 5 months to the next coupon payment. A
clean price of $1,043 and the par value is $1,000What is the
invoice price?

Answer 1

The invoice price is $1,099.42.

Step-by-step explanation:

The invoice price of a bond can be calculated by adding the clean price and the accrued interest.

Given that the bond has a coupon rate of 6.77% and makes semiannual payments, we need to determine the accrued interest for the 5 months to the next coupon payment.

To calculate the semiannual coupon payment, we multiply the coupon rate by the par value: 6.77% * $1,000 = $67.70.

Since there are 5 months remaining until the next coupon payment, we divide the semiannual coupon payment by 6 and multiply it by 5: ($67.70 / 6) * 5 = $56.42.

The invoice price is then calculated by adding the clean price and the accrued interest: $1,043 + $56.42 = $1,099.42.