Question

A coupon bond that pays semiannual interest is reported in the Wall Street Journal as having an ask price of 116% of its $1,000 par value. If the last interest payment was made 3 months ago and the coupon rate is 5.90%, the invoice price of the bond will be _________.

Answer 1

1,172.50

Step-by-step explanation:

Calculation for the invoice price

Since Semiannual is 6 month and the last interest payment was made 3 months ago that means we would have 3 months left.

Using this formula

Invoice price = Flat rate + Accrued interest

let plug in the formula

Invoice price = 1.16(1,000) + 25.00(3/6)

Invoice price=1,160+12.5

Invoice price=1,172.50

Therefore the invoice price will be 1,172.50