You purchase a bond with an invoice price of $1,120. The bond has a coupon rate of 7.5 percent, semiannual coupons, and there are four months to the next coupon date. What is the clean price of the bond?

Question

Quizplus · Accepted Answer

The clean price is the invoice price minus the accrued interest. The accrued interest for four months is calculated as (7.5%/2) * (4/6) * $1,000 = $12.50. Therefore, the clean price is $1,120 - $12.50 = $1,107.50.

You Purchase a Bond with an Invoice Price of $1,120