Question

You purchase a bond with an invoice price of $1,319. The bond has a coupon rate of 6.25 percent, a face value of $1,000, and there are two months to the next semiannual coupon date. What is the clean price of this bond

Answer 1

Answer:

The clean price is $1298.17

Explanation:

Below is the calculation:

Accrued interest = (Par value x Coupon rate) x (Number of months/12)

Accrued interest = 1000 x 6.25% x 4/12

Accrued interest = $20.83

Now use below formula:

Clean price of the bond = Invoice price of the bond - Accrued interest

Clean price = $1,319 - $20.83

Clean price = $1,298.17

Thus the clean price is $1298.17