Today,you are buying a $1,000 face value bond at an invoice price of $987.The bond has a 6 percent coupon and pays interest semiannually.There are two months until the next coupon date.What is the clean price of this bond?

Question

Quizplus · Accepted Answer

To calculate the clean price of the bond, we first need to calculate the accrued interest since the last coupon payment. Since there are two months until the next coupon date, the accrued interest can be calculated as:

Accrued Interest = (6% x $1,000) x (2/12) = $10

Therefore, the clean price of the bond can be calculated as:

Clean Price = Invoice Price - Accrued Interest 
Clean Price = $987 - $10 
Clean Price = $977

Therefore, the best choice is (D) $977.

Today,you Are Buying a $1,000 Face Value Bond at an Invoice