How to Calculate the Invoice Price of a Bond
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 _________.
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