Question

Bond’s dirty price is $780. Coupon rate is 6%. The coupon is paid semi-annually. There are two months left until the next coupon date. What is the bond’s clean price?

Answer 1

Accrued interest is the coupon payment for the period times the fraction of the period that has passed since the last coupon payment. There are two months until the next coupon payment, so four month has passed since the last coupon payment.

Accrued interest = $60/2 × 4/6

Accrued interest = $20

Clean price = Dirty price – Accrued interest

Clean price = $780 – $20

Clean price = $760.00