Copyright

Consider the following three bond quotes: a Treasury bond quoted at 106:18, a corporate bond...

Question:

Consider the following three bond quotes:

a Treasury bond quoted at 106:18, a corporate bond quoted at 96.85, and a municipal bond quoted at 101.90.

If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars?

Bond Quotes:

Bond prices are often quoted in terms of a percentage of the face value of the bond. For example, a corporate bond quoted with 96 means that the bond is trading at 96% of the face value. A special case is the Treasury bond, for which the number after the colons in the quote represents 32nds.

Answer and Explanation:

A treasury bond quoted at 106:18 implies that the bond is trading at (106 + (18/32)) / 100 = 106.56% of the face value. Given a face value of $1000,...

See full answer below.

Become a Study.com member to unlock this answer! Create your account

View this answer

Learn more about this topic:

Loading...
Bond Valuation: Formula, Steps & Examples

from Finance 301: Corporate Finance

Chapter 7 / Lesson 6
41K

Related to this Question

Explore our homework questions and answers library