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a_sh-v [17]
3 years ago
15

"A 5 year 3 1/2% Treasury Note is quoted at 98-4 - 98-9. The note pays interest on Jan 1st and Jul 1st. A customer buys 5M of th

e notes. Approximately how much will the customer pay, disregarding commissions and accrued interest?"
Business
1 answer:
UkoKoshka [18]3 years ago
3 0

Answer:

$4,914.06

Explanation:

Calculation for how much will the customer pay by disregarding commissions and accrued interest

The 5M which the customers used to buy the notes means that the customer is buying $5,000 par value of the notes.

Take note that the capital letter M in Latin means for $1,000.

Therefore the customer will have to buy at the ask price of 98 and (9/32nds =0.28125) which means that 98%+0.28125 will gives us 98.28127.

Now let calculate for how much will the customer pay by disregarding commissions and accrued interest

98.28125% * $5,000 par

= $4,914.06

Therefore the amount that the customer pay by disregarding commissions and accrued interest will be $4,914.06

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Answer:

The answer is 7.65%

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