Question

you purchase a bond with an invoice price of $1,119. the bond has a coupon rate of 6.25 percent, a face value of $1,000, and there are four months to the next semiannual coupon date. What is the clean price of this bond?

Answer 1

Solution:
	Clean price = $1,108.58
Working Notes:
	Clean price = Invoice price - accrued interest
	Clean price = $1,119 - $10.42
	Clean price = $1,108.58
	Accrued interest = interest of the (6-4=2 months) expired out of 6 month of a semi-annual coupon.
	Accrued interest = face value x coupon rate x period expired
	Accrued interest = $1,000 x 6.25% x 2/12
	Accrued interest = $10.4166666
	Accrued interest = $10.42
Please feel free to ask if anything about above solution in comment section of the question.