You are buying a bond at a clean price of $1,140. The bond has a face value of $1,000, an 8 percent coupon, and pays interest semiannually. The next coupon payment is 1 month from now. What is the dirty price of this bond?

Question

Quizplus · Accepted Answer

Since the next coupon payment is only 1 month away, we need to add the accrued interest to the clean price to get the dirty price. The semiannual coupon payment is 8%/2 = 4%. Thus, the accrued interest for 1 month is 4%/6 = 0.67%. 
Dirty price = clean price + accrued interest = $1,140 + $1,000 x 0.0067 = $1,173.33.

You Are Buying a Bond at a Clean Price of $1,140