Acoupon bond paying semiannual interest is reported as having an ask price of 114% of its $1,000 par value. if the last interest payment was made one month ago and the coupon rate is 7%, what is the invoice price of the bond? assume that the month has 30 days. (do not round intermediate calculations. round your answer to 2 decimal places.)

$1,145.83

Explanation:

The invoice price of the bond comprises of ask price and interest accrued for the period of 1 month.

The formula that can be derived for calculating the invoice price is as follows:

Invoice Price = Current Ask Price + Interest Accrued

Ask price is 114% of the par value, then the ask price will be:

= $1,000 × 114%

= $1,140

Interest will be accrued for 1 month only.

The interest for the whole year is:

= $1,000 × 7%

= $70  

and for 1 month it would be:

= $70 × 1/12

= $5.83

Based on the above calculations, we get,

Invoice Price = Current Ask price + Interest Accrued

                     = $1,140 + $5.83

                     = $1,145.83

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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