Question

Suppose that today’s date is April 15. A bond with a 8% coupon paid semiannually every January 15 and July 15 is quoted as selling at an ask price of 101.09. If you buy the bond from a dealer today, what price will you pay for it?

Answer 1

$1,030.94

Step-by-step explanation:

April 15 is halfway through the semiannual coupon period of July 15. Therefore, the invoice price will be higher than the stated ask price by an amount equal to one-half of the semiannual coupon. Since The bond is quoted as selling at an ask price of 101.09 percent of par

Therefore the invoice will be :

$101.094 + 1/2×$40 = $1,030.94