Question

If the quote for a Treasury bond is listed in the newspaper as 98.2812 bid, 98.4062 ask, the actual price at which you can purchase this bond given a $10,000 par value is _____________.

Answer 1

Answer:

98.4062 (10,000)/100 = $9840.62

Explanation:

A bond price is the last price at which a bond is traded, expressed as a percentage of the nominal value and converted into a point scale. The face value is generally set at 100, which corresponds to 100% of the face value of a $ 1,000 bond. For example, if a corporate bond is quoted at 99, it means that it is trading at 99% of its nominal value. In this case, the purchase cost of each bond is $ 990. Treasury government bonds with a term of more than 10 years but less than 30 years. Treasury bonds pay a fixed interest rate each year. Interest payments are made twice a year. Investors receive the nominal amount of the bond at maturity.

Answer 2

Solution and explanation:

Given data:

Ask price: 98.4062, bid price: 98.2812, par value of the bond: $10,000

The following formula is used in order to calculate the actual value of the bond

The ask price will be used while calculating the actual value of the bond and the par value of the bond will be used

Ask price will be multiplied with par value of the bond and divided by 100

$98.4062(10000) / 100$= $9840.62

Therefore, the par value as per the above calculation is $9840.62