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.