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 2 months until the next coupon date. What is the clean price of this bond?

Question

Quizplus · Accepted Answer

To find the clean price, we need to subtract the accrued interest from the invoice price. 
First, we need to find the amount of accrued interest: 
Coupon payment = (6% x $1,000)/2 = $30 (since it pays semiannually)
Days since last coupon = 2 months x 30 days/month = 60 days
Accrued interest = ($30/6 months) x (60 days/ 180 days) = $10
Now we can find the clean price: 
Clean price = Invoice price - Accrued interest = $987 - $10 = $977.

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