Today,June 15,you want to buy a bond with a quoted price of 98.64.The bond pays interest on January 1 and July 1.Which one of the following prices represents your total cost of purchasing this bond today?

Question

Quizplus · Accepted Answer

The dirty price (also known as the full price) includes any accrued interest on the bond since the last coupon payment. Since the bond pays interest on July 1st, there has been some accrued interest that needs to be added to the quoted price to arrive at the total cost of purchasing the bond today. The clean price (A) does not include any accrued interest and is therefore not the correct answer. The asked price (C) and bid price (E) refer to the current price of the bond in the market and are not relevant to the total cost of purchasing the bond today. The quoted price (D) is simply the price at which the bond is being quoted in the market and does not take into account any accrued interest.

Today,June 15,you Want to Buy a Bond with a Quoted