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Essentials of Investments- Bodie, Kane and Marcus. 1. A government bond pays a semiannual coupon at...

Essentials of Investments- Bodie, Kane and Marcus.

1. A government bond pays a semiannual coupon at 8% and makes payments on January 7 and July 7 of each year. The WSJ reports an ask price for this bond on January 22 of $ 1003,125. What is the invoice price (invoice Price) of the bond if the period between coupon and coupon is 182 days?

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Answer #1

Number of days : 22-7= 15 days

Accrued Interest : Par Value * coupon rate * n/ 360

           = 1000 * .08 *15/182

           = 6.59

Invoice Price = Flat price + accrued Interest

               = 1003.125 + 6.59

                = $ 1009.715

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