The clean price of a bond is calculated as: Multiple Choice The current price of a bond divided by the coupon rate The price of a bond minus the coupon payment The price of a bond usually expressed as percentage of par value The price of a bond plus accrued interest

Finance Dec 25, 2020

The clean price of a bond is calculated as:

Multiple Choice

The current price of a bond divided by the coupon rate
The price of a bond minus the coupon payment
The price of a bond usually expressed as percentage of par value
The price of a bond plus accrued interest

Expert Solution

The correct option is "The price of a bond minus the coupon payment"

Say a bond gives an annual coupon, so when a person holds the bond for sometime after the coupon payment, then the price of the bond increases as the person holding the bond is getting close to the coupon payment date. When you subtract the coupon payment from the price of the bond, you get the clean price of the bond. Where there is no accrued coupon payment.

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