Asked by Michaela Sharp on Jun 07, 2024
Verified
The difference between the clean price and the dirty price of a bond is:
A) The dealer's spread.
B) The rounding difference created when bonds are quoted in 64ths.
C) The accrued interest.
D) The amount of interest that is in default.
E) The difference between the current rate and the original coupon rate of a variable bond.
Clean Price
The price of a bond excluding any interest that has accrued since issue or during the last coupon payment.
Dirty Price
The price of a bond that includes accrued interest, in contrast to the clean price which excludes it.
Accrued Interest
Interest that has accumulated over a period but has not yet been paid or received.
- Absorb the details regarding the structure and parts of a bond, with emphasis on the differences among face value, market price, clean price, and dirty price.
Verified Answer
CI
Chadrick IngramJun 13, 2024
Final Answer :
C
Explanation :
The difference between the clean price and the dirty price of a bond is the accrued interest. The clean price is the price of a bond excluding any interest that has accrued since issue or during the last coupon payment. The dirty price includes this accrued interest.
Learning Objectives
- Absorb the details regarding the structure and parts of a bond, with emphasis on the differences among face value, market price, clean price, and dirty price.