Explanation:
The amount the seller receives at the settlement date is the invoice price, also known as the dirty price. The dirty price equals the quoted (clean) price plus accrued interest.
First, convert the quotes per $100 face value into a $1,000 face value equivalent (a multiplier of 10):
$100 face value 1`,022.50$2.50 per $100 face value 25.00`Dirty Price = Clean Price + Accrued Interest = $1,022.50 + $25.00 = $1,047.50
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Q.91 A risk manager is considering buying a $1,000 face value, semi-annual coupon bond with a quoted price of 102.25. The interest accrued since the last coupon is $2.50 per $100 face value. If the manager pays the dirty price, how much will the seller receive at the settlement date?
A
$997.5
B
$1,022.5
C
$1,025
D
$1,047.5