Question

Assume the bond’s quoted ("clean") price is $1,135.56, the bond has the coupon rate of 8.4% and that the coupons are paid semiannually. Further assume that the bond has the face value of $1,000. What is the bond’s invoice ("dirty") price if the last coupon payment took place five months ago?

Answer 1

$1,170.56

Step-by-step explanation:

Calculation for the bond’s invoice ("dirty") price

Using this formula

Bond’s invoice ("dirty") price=Bond’s quoted +m("clean") price + Accrued interest

Let plug in the formula

Bond’s invoice ("dirty") price=$1,135.56+($1,000*8.4%*5/12)

Bond’s invoice ("dirty") price=$1,135.56+$35

Bond’s invoice ("dirty") price=$1,170.56

Therefore the bond’s invoice ("dirty") price will be $1,170.56