You want to buy a bond that has a quoted price of $897. The bond pays interest semiannually on March 1 and September 1. The coupon rate is 8%. What is the clean price of the bond if today's date is May 1? For simplicity assume a 360-day year.

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Quizplus · Accepted Answer

The clean price of a bond is its price excluding any accrued interest. Since the bond pays interest semiannually and today's date is May 1, the last interest payment was made on March 1. Therefore, any accrued interest from March 1 to May 1 would not be included in the clean price. The quoted price of $897 is already the clean price, as the question does not specify adding accrued interest to calculate a dirty price.

You Want to Buy a Bond That Has a Quoted