What is the dirty price of a bond?
A) the bond's price based only on the bond's yield
B) the bond's actual cash price
C) the bond's price based only on coupon payments
D) the bond's price less an adjustment for changes in interest rates

Question

Quizplus · Accepted Answer

The dirty price of a bond refers to the actual cash price that an investor pays to purchase the bond, which includes the accrued interest since the last coupon payment date. Therefore, the dirty price takes into account both the bond's yield and the coupon payments. Option A is incorrect because it only considers the bond's yield, while option C only considers the coupon payments. Option D is also incorrect because it refers to the clean price, which is the bond's price without the accrued interest.

What Is the Dirty Price of a Bond