4. Suppose it’s February 25th, and you’re engrossed in the bond pages of Bloomberg—because that’s just how you roll! And while reading all of the quotes you find one that says that the ask price is currently 101:14, with semi-annual coupons of 5.5 percent, payable on January 25 and July 25. Based upon your amazing technical skills you: 1) figure in your head that the coupon period has 182 days in it; and 2) whip out your four-function calculator and quickly establish that the invoice price of that bond is:
Answer:
Price of bond = 1000 * 101.14% = 1011.40
It is February 25th; hence last semiannual coupon paid was on January 25th.
Accrued interest from Jan 25 to Feb 25 (for 31 days) = 1000 * 5.5% / 2 * 31/ 182 = $4.68
Hence:
Invoice price = 1011.40 + 4.68 = $1,016.08
Invoice price = $1,016.08
4. Suppose it’s February 25th, and you’re engrossed in the bond pages of Bloomberg—because that’s just...