What is the dirty price of the bond

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An six-year annual-pay coupon bond was issued with a face value of $1000 and a coupon rate of 12%. It is now 1.25 years later and the yield-to-maturity is 9%. (Keep in mind that the cash flows happen 0.75 years, 1.75 years, 2.75 years, etc. from now.)

You may use a computer for computations, but please show the basic algebra.

(a) What is the "dirty price" of the bond? (Remember, the dirty price is the current value of the bond. It includes all interest accrued since the last coupon date.)

(b) How much accrued interest does the bond contain? (Convention is to accrue interest at a constant dollar amount per day - simple interest, NOT compound interest.)

 

Reference no: EM13263184

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