Question

42. You purchas e a bond with a coupon rate of 6.15 percent, quarterly coupons, and a clean price of $998.40. If th Accruded interest e next coupon payment is due in one month, what is the invoice price? r=6,15% cl ean -invoice inr ertst dirty price clean price! dirty a 101.

how to solve

Answer 1

Accrued interest is the coupon payment for the period times the fraction of the period that has passed since the last coupon payment. Since we have a quarterly coupon bond, the coupon payment per three months is one-fourth of the annual coupon payment. There is one months until the next coupon payment, so two months have passed since the last coupon payment. The accrued interest for the bond is:

Accrued interest = $61.5/4 × 2/3 = $10.25

Dirty price = Clean price + Accrued interest = $998.40 + $10.25 = $1,008.65