A coupon bond is reported as having an ask price of 108% of the $1,000 par value in the Wall Street Journal.If the last interest payment was made one month ago and the coupon rate is 9%,the invoice price of the bond will be ____________.

Question

Quizplus · Accepted Answer

The invoice price includes the quoted price plus accrued interest. The quoted price is 108% of $1,000, which is $1,080. The annual coupon payment is 9% of $1,000, which is $90, or $7.50 per month. Since one month has passed since the last payment, the accrued interest is $7.50. Therefore, the invoice price is $1,080 + $7.50 = $1,087.50.

A Coupon Bond Is Reported as Having an Ask Price