Question

A bond has a quoted price of $1,070. The bond has two months to the next semiannual coupon date. If the face value of the bond is $1,000 and the coupon rate is 6.92 percent, calculate the dirty price of the bond.

Answer 1

$1,081.53

Step-by-step explanation:

The computation of the direct price of the bond is shown below:

= Quoted price of the bond + accrued interest payment

where,

Accrued interest payment equal to

= Face value of the bond × number of months ÷ total number of months in a year × coupon rate

= $1,000 × 2 months ÷ 12 months × 6.92%

= $11.53

So, the dirty price is

= $1,070 + $11.53

= $1,081.53