a simple question about bond price

daerbao · October 26th, 2008, 11:10 pm

a bond coupon will be paid at the end of each year, if today is the middle of the year, then the price should be1. P=0.5Coupon*Survival*RiskFreeDF2. p=Coupon*Survival*RiskFreeDF-0.5CouponWhich one is correct?I know Dirty price-accrue(0.5Coupon)=clean price, but the difference between 1and 2 is not accrue(0.5Coupon).Could you please let me knowwhere I am wrong?Thanks!

DavidJN · October 27th, 2008, 4:22 am

You are computing the present value of only one coupon? And where is the (eventual) return of principal?

daerbao · October 27th, 2008, 12:01 pm

There's principal, I just write the first period coupon, remaining parts is the regular