You purchase a bond with a coupon rate of 8 percent, semiannual coupons, and a clean price of $1,011. If the next coupon payment is due in five months, what is the invoice price?

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Quizplus · Accepted Answer

The invoice price is the clean price plus the accrued interest. The bond pays 8% annually, or 4% semiannually. The accrued interest for five months is (5/6) of the semiannual coupon payment. The semiannual coupon payment is $1,000 * 4% = $40. Accrued interest = (5/6) * $40 = $33.33. Therefore, the invoice price = $1,011 + $33.33 = $1,044.33.

You Purchase a Bond with a Coupon Rate of 8