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Bonds trade on prices that are a percentage of face value and these are called 'Clean Prices'. So 104.25 means that the $10,000 face amount purchased will cost the investor $10,425 + Accrued Interest. If the bond last paid it's 4% Semi-Annual coupon exactly 3 months ago on the settlement date the cost will be $10,425 + $100 of Accrued Interest (half of the next 2% coupon having accrued), giving a total cost of $10,525. Example calculations can be found for US Treasuries and other instruments at www.davidandgoliathworld.com. The 'Dirty Price' in the example given would then be 105.25, including the Accrued Interest that is not routinely included in the dealer's 'Clean Price' quotation.

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Q: What does it mean when a bond is traded for 104.25?
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