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.

B. $105.19.

C. $105.19 minus accrued interest.

D. $105.19 minus the coupon payment.

Answer:B

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.