A T-bond with a $1,000 par is quoted at 97-14 bid,97-15 ask. The clean price for you to buy this bond is

Question

Quizplus · Accepted Answer

To calculate the clean price, we first need to convert the quote into a decimal, which is 97 + 14/32 = 97.4375 for the bid price and 97 + 15/32 = 97.46875 for the ask price.

The clean price is the quoted price minus any accrued interest, which is the interest that has accumulated since the last coupon payment.

Since T-bonds pay interest semi-annually, we need to calculate the accrued interest for the time since the last coupon payment. If we assume that the last coupon payment was six months ago, then the accrued interest would be:

Coupon payment = $1,000 * (8% / 2) = $40
Accrued interest = $40 * (184 / 365) = $20.27

Therefore, the clean price for buying this bond is:

Bid price - accrued interest = $974.375 - $20.27 = $974.69

Therefore, the best choice is C.

A T-Bond with a $1,000 Par Is Quoted at 97-14