Answer to Question #217865 in Finance for Beauty Magadlela

Question

Consider Bond XYZ

Coupon rate: 9,75% per year

Yield to maturity: 11,4% per year

Maturity date: 15 April 2046

Settlement date: 29 November 2021

The clean price is

[1] R88,77706%. [2] R81,69720%. [3] R85,22964%. [4] R86,37296%. [5] R86,39294%

Answer 1

the clean price is the price of a bond excluding any interest accrued since bond's issuance and the most recent coupon payment. Comparatively, the dirty price is the price of a bond including the accrued interest. Therefore, Clean Price = Dirty Price − Accrued Interest.

To find the clean price we also need to know the face value to calculate the coupon payment and dirty price.