Peter Stone is considering buying a$100 face value,semi-annual coupon bond with a quoted price of 105.19.His colleague points out that the bond is
trading ex-coupon.Which of the following choices best represents what Stone will pay for the bond?
A.$105.19 plus accrued interest.
C.$105.19 minus accrued interest.
D.$105.19 minus the coupon payment.
Since the bond is trading ex-coupon,the buyer will pay the seller the clean price,or the price without accrued interest.So,Stone will pay the quoted price.The choice$105.19 plus accrued interest represents the dirty price(also known as full price).This bond would be said to trade cum-coupon.