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A coupon bond paying semiannual interest is reported as having an ask price of 122% of its $1,000 par value. If the last interest payment was made one month ago and the coupon rate is 5%, what is the invoice price of the bond

Respuesta :

Answer:

The correct answer is $1,224.12

Explanation:

According to the given scenario, the calculation of the invoice price of the bond is as follows:

Invoice price =  Clean price + accrued interest

here

Clean price

= 122% of $1,000

= $1,220

And, the accrued interest is

= ($1,000 × 0.05 ÷ 2) × (30 days ÷ 182 days)

= 4.12088

Now the invoice price is

= $1,220 + $4.12088

= $1,224.12

hence, the invoice price of the bond is $1,224.12

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