A government bond with a coupon rate of 5% makes semiannual coupon payments on J
ID: 2782698 • Letter: A
Question
A government bond with a coupon rate of 5% makes semiannual coupon payments on January 12 and July 12 of each year. The Wall Street Journal reports the asked price for the bond on January 27 at 100:14. What is the invoice price of the bond? The coupon period has 182 days. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
A government bond with a coupon rate of 5% makes semiannual coupon payments on January 12 and July 12 of each year. The Wall Street Journal reports the asked price for the bond on January 27 at 100:14. What is the invoice price of the bond? The coupon period has 182 days. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Explanation / Answer
The reported bond price is: 100 + 14/32 percent of par = $1,004.375
15 days have passed since the last semiannual coupon was paid,
so accrued interest equals = 25 * 15/ 182 = 2.06044
The invoice price is the reported price plus accrued interest:
= $2.06044 + $1,004.375
Invoice Price = 1,006.44