Question

You decide to invest in a bond with a 10% coupon paid semi-annually every February 1st and August 1st. The bond is currently selling at an asking price of 101.25. What price should you pay for this bond today (if today's date is May 1st)? $1,012 $1,037.50 $1,012.50 $1,037

Answer 1

The question is missing an important information. 'The bond is currently selling at an asking price of 101.25' In this part there should have been a date at which date the bond was selling at 101.25.

Nevertheless, I will provide with the calculation, if you find out the date, just plug in the value in it and you will get the answer.

The bond price mentioned is $ 101.25 percent of par, which would be $ 1012.5. Since, it is asking for price at May 1st then you know that it has been 89 days since the last semi-annual coupon was paid ( February 1st (28) + March (31) + April (30)  = 89 days.

The missing date (from the question) will be divided by 89 days. The answer will be added to $1012.5.