Question

Assume the bond’s invoice ("dirty") price is $1,054.23, the bond has the coupon rate of 7.5% and that the coupons are paid semiannually. Further assume that the bond has the face value of $1,000. What is the bond’s quoted ("clean") price if the last coupon payment took place five months ago?

Answer 1

The bond’s quoted ("clean") price is $1,022.98

Step-by-step explanation:

The computation of the bond quoted clean price is shown below:

Clean price is

= Dirty price - face value × coupon rate × number of months ÷ total number of months in a year

= $1,054.23 - $1,000 × 7.5% × 5 ÷ 12

= $1,054.23 - $31.25

= $1,022.98

Hence, the bond’s quoted ("clean") price is $1,022.98

We simply applied the above formula