Final answer:
The invoice (dirty) price of the corporate bond is $1,269.81.
Step-by-step explanation:
To calculate the invoice (dirty) price of a corporate bond, we need to consider the present value of its future coupon payments and principal repayment. The bond has a coupon rate of 8% and is paid semiannually. Assuming 30 days per month, and it is now July 15, 2015. The bond matures on November 15, 2025, meaning it has 10 years and 4 months until maturity.
First, calculate the present value of the coupon payments. The bond pays semiannual coupons, so there are 20 coupon payments remaining (10 years * 2 payments per year). Each payment is 8% of the face value, which is $40 (8% * $1,000 / 2). Discounting these payments back to the present using a discount rate of 4% (half of the coupon rate), we get:
$40 / (1 + 0.02)^1 + $40 / (1 + 0.02)^2 + ... + $40 / (1 + 0.02)^20 = $719.92
Next, calculate the present value of the principal repayment. The face value of the bond is $1,000, and discounting it back to the present using the discount rate of 4% for 10 years and 4 months, we get:
$1,000 / (1 + 0.02)^(10.33) = $549.89
Finally, sum the present values of the coupon payments and principal repayment to find the invoice (dirty) price of the bond:
$719.92 + $549.89 = $1,269.81