Question
Which one of the following is the quoted price of a bond? a. Face value b. Discount price c. Par value d. Dirty price e. Clean price
Ask by Tyler Wilson. in the United States
Feb 26,2025
Upstudy AI Solution
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Answer
The quoted price of a bond is the **clean price**.
Solution
To determine which option represents the quoted price of a bond, let's clarify the terms:
1. **Face Value**: This is the nominal value of the bond, which is paid back to the bondholder at maturity. It is not the quoted price.
2. **Discount Price**: This refers to the price at which a bond is sold below its face value. It is not typically used as a quoted price.
3. **Par Value**: This is another term for face value, indicating the amount that will be paid back at maturity. It is not the quoted price.
4. **Dirty Price**: This is the total price of a bond including accrued interest. It is often not the quoted price since it includes interest that has accumulated since the last coupon payment.
5. **Clean Price**: This is the price of the bond excluding any accrued interest. It is the standard quoted price of a bond in the market.
Based on these definitions, the correct answer is:
**e. Clean price**
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Simplify this solution Bonus Knowledge
When you’re diving into the world of bonds, the "quoted price" often refers to the clean price, which is the price excluding any accrued interest. This helps investors get a clearer picture of the bond's market value without the complication of the interest that accumulates over the bond’s life. In practice, the distinction between clean and dirty prices can significantly impact how much you pay when buying a bond. If you're purchasing a bond right before interest payment is due, you’ll pay the dirty price, which includes that accrued interest! So, knowing how these prices work can save you some serious cash and keep your investment savvy!
