Agovernment bond with a coupon rate of 7% makes semiannual coupon payments on january 15 and july 15 of each year. the wall street journal reports the asked price for the bond on january 30 at $1,001.25. what is the invoice price of the bond?

Invoice price=$1004.17

Explanation:

The invoice price of a bond is equal to the clean price/quoted price plus accrued interest.  The invoice price is also known as the dirty price. The interest that has accrued since the last interest payment should be  added to the quoted price to compensate the seller for the interest that he has earned but is not going to receive . The buyer will receive the total interest at the next interest payment date which also includes interest that accumulated on the bond before the buyer bought he bond.

Invoice price = quoted price + accrued interest

= quoted price + Coupon × (Days Since Last Coupon / Days in Current Coupon Period)

Coupon per period =

Days since last coupon payment= days between January 15 and Jan 30=15days

Days in Current coupon period = 180 days

Invoice price=

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