Invoice Price of a Bond

[afterworkguinness]

Hi David,
I'm reading through the notes on Hull chapter 6 AIM: "Differentiate between the clean and dirty price for a US Treasury bond; calculate the accrued interest and dirty price on a US Treasury bond."

I'm confused by the statement that the invoice price of the bond = the face amount multiplied by the full price. I thought the invoice prices was simply the full/dirty price ? Your YouTube video on accrued interest is inline with my understanding above. Can you clarify ? Thanks !

The video:

ps: You should bring back the theme music at the start of your Youtube videos.

 

[kik92]

Hi David,

I too am confused with the statement above. Could you kindly clarify?

 

[David Harper CFA FRM]

Hi @kik92 It's a mistake, sorry. The invoice price is the full price (i.e., quoted or clean price plus the accrued interest). The "multiplied by the full price" has the intention to recognize that, for example, if the bond's full price is $123.00 and you buy $100,000 face amount, because the price is per 100 face amount, the cost = 123.00/100.00 * $100,000 = $123,000. But it's poorly explained, sorry. Thanks!

 

[kik92]

Thanks David!