How to Calculate the Invoice Price of a Bond

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A bond with coupons attached to it is a Coupon Bond. Coupons represent semi-annual interest payments to the bearer. Coupon Bond is also known as the Bearer Bond. Below is an example of how to calculate the invoice price of a bond:

A coupon bond pays semi-annual interest is reported with the ask price of 117% of its $1,000 par value in the WSJ. If the last interest payment was made two months ago and the coupon rate is 6%, what is the invoice price of the bond  _________.

Answer:

Invoice Price = Quoted Price or Ask Price + Accrued Interest

Accrued interest = Coupon/2 x Days Since Last Payment/Days Between Payment

Therefore:  60/2 x  60/180 = 10

Invoice Price = (117% x 1000) + 10 = $1,180

  

   

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