It is April 2, 2018, and you are considering purchasing an investment-grade corporate bond that has a

Question:

It is April 2, 2018, and you are considering purchasing an investment-grade corporate bond that has a $1,000 face value and matures on June 4, 2022. The bond's stated coupon rate is 4.60 percent, and it pays on a semiannual basis (that is, on June 4 and December 4). The bond dealer's current asks yield to maturity is 3.80 percent. (Between the last coupon date and today, there are 118 "30/360" days. Between last coupon date and the next coupon date, there are 180 "30/360" days.)

a. Calculate the total amount (invoice price) you would have to pay for this bond if you purchased the issue to settle today.

b. Separate this total invoice amount into (i) the bond's current "flat" (without accrued interest) price and (ii) the accrued interest.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...

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