Question

The bond has a coupon rate of 6.11 percent, it makes semiannual payments, and there are 2 months to the next coupon payment. A clean price of $977 and the par value is $1000. What is the invoice price? $956.63 $946.45 $997.37 $1007.55 $966.82

Answer 1

Here the Par value is $1000

Clean Price is the price with any accrual of interest added on it.

So, given Clean price is $977

Also 2 months are left for next interest due, so 4 months accrual should be added in the clean price to get invoice price

Therefore,

Invoice price= 977 +1000 X 6.11 X 1/2(semi annual interest) X 4/6 (4 months interest accrual)

= 977 + 20.37

= $937.37