For the ibm bond quote below, assuming a settlement date of 8/25/14, what is the dirty price of this bond? use the bid price when calculating dirty price. a. 113.055b. 113.357c. 115.595d. 115.604e. 116.054

Face value of bond, annual rate of interest and issue date is not mentioned in the question in absence of it exact answer cannot be calculated. However, brief explanation of topic in question is given under.

Explanation:

Dirt price is the full price a buyer (or investor) pays to buy a bond. It equals the quoted price plus accrued interest. It compensates the seller for the accrued interest she/he earned but not yet received.

To calculate it divide the number of days since the last interest payment by 360. For example, if 15 days interest has been accrued and market value of bond is 1000 $ than by dividing 15 by 360 you get 0.0417. Multiply your result by the annual interest payment (say $ 60) to determine the accrued interest. In this example, multiply 0.0417 by $60 you get $2.50 that is accrued interest. Add the accrued interest to the bond’s market value to calculate its dirty price. Concluding the example, add $2.50 and $ 1000 to get a dirty price of $ 1002.5.

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