A 6-year,$1,000 face value bond issued by Taylor Tools pays interest semiannually on February 1 and August 1.Assume today is October 1.What will the difference,if any,be between this bond's clean and dirty prices today?

Question

Quizplus · Accepted Answer

The difference between a bond's clean and dirty prices is the accrued interest since the last interest payment. Since the last payment was on August 1 and today is October 1, two months' interest has accrued, making the difference between the clean and dirty prices equal to two months' interest.

A 6-Year,$1,000 Face Value Bond Issued by Taylor Tools Pays