The situation
Face value is ₹1,000, annual coupon is 7%, and comparable yield is 9% with annual compounding.
Your task
What is the price immediately after a coupon date?
Reveal step-by-step solution
Set up the problem
Year-one cash is ₹70. Year-two cash is ₹1,070 including principal.
Work through the numbers
Price = ₹70 ÷ 1.09 + ₹1,070 ÷ 1.09² ≈ ₹964.82.
Interpret the result
The bond trades below par because the 7% coupon is below the 9% required yield. This exercise excludes credit events and accrued interest.
What to remember
Discount every coupon and principal using a yield that matches the payment frequency.