A $1000 par, semi-annual pay bond is trading for 89.14, has a coupon of 8.75% and has accrued interest of 43.72. The clean price of the bond is: A) $847.69 B) $891.40 C) $935.12 D) $1000.00
891.40 - 43.72 = 841.68 Clean Price A
A?
Is this an example deeply-deeply-deeply-discounted bond or just an typo, considering it to be the later… CLEAN PRICE =CMV - Accrued Interest = 841.68 = A DIRTY PRICE = CMV + Accrued Interest = 935.12 = C - Dinesh S
I think it is B. The clean price is just the market price of the bond. Dirty or full price adds accrued interests to market value and divides it by the nominal. Cheers.
In the US, corporate bonds are quoted clean. So B. (http://en.wikipedia.org/wiki/Dirty_price) Of course there are (or have been) markets where bonds are priced dirty, yielding A. (I believe highly inflationary Brazil was one such market.) Without specifying the market, the correct answer is E: crap question, move on. Dinesh: quote conventions for bonds are per 100 of par, so it’s not a typo.
B!
kiko - clean price is the full price less accrued interest. it’s A
DarienHacker Wrote: ------------------------------------------------------- > In the US, corporate bonds are quoted clean. So > B. > > (http://en.wikipedia.org/wiki/Dirty_price) > > Of course there are (or have been) markets where > bonds are priced dirty, yielding A. (I believe > highly inflationary Brazil was one such market.) > Without specifying the market, the correct answer > is E: crap question, move on. > > Dinesh: quote conventions for bonds are per 100 > of par, so it’s not a typo. Thanks! Do not know about this.
Dirty Price adds the accrued interest: Clean Price: Current price Dirty Price: 935.12
yea, so B
should be b
Parry, what is the answer?
Definitely B in the US and most everywhere else I am aware of.
B is right! well done DarienHacker you have done your homework.
trick question. Bonds are quoted at the clean price in the US. To calculate the dirty price, add the accrued interest.
Yaaaaaa i got B too. Finally something to cheer for.