Question

A bond with a coupon rate of 6% makes semiannual coupon payments on January 15 and July 15 of each year. The Wall Street Journal reports the ask price for the bond on January 30 at 100.0625. What is the invoice price of the bond? The coupon period has 182 days. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Invoice price:_____

Answer 1

Given,

Coupon rate = 6%

Ask price quote = 100.0625

Days since last coupon payment = 15 days (January 15 to January 30)

Coupon period = 182 days

Solution :-

Bond price = $1000 x 100.0625% = $1000.625

Semi annual coupon payment = $1000 x 6% x 1/2 = $30

Accrued interest = semi annual coupon payment x (days since last coupon payment/coupon period)

= $30 x (15 days/182 days) = $2.47252747

Invoice price = bond price + accrued interest

= $1000.625 + $2.47252747 = $1003.10