You purchase a bond with an invoice price of $988. The bond has a coupon rate of 7.4%, and there are ﬁve months to the next semiannual coupon date. What is the clean price of the bond?

Question

Quizplus · Accepted Answer

The clean price of a bond is the invoice price minus the accrued interest. The accrued interest for five months on a 7.4% annual coupon rate (3.7% semiannual) is calculated as (5/6) * (3.7% of face value). Subtract this from the invoice price to find the clean price.

You Purchase a Bond with an Invoice Price of $988