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aksik [14]
3 years ago
14

A 15-year 3 1/4% Treasury Bond is quoted at 100-12 - 100-16. The bond pays interest on Jan 1st and Jul 1st. A customer sells 5M

of the bonds. Approximately how much will the customer receive, disregarding commissions and accrued interest?
Business
1 answer:
trasher [3.6K]3 years ago
4 0

Answer:

The multiple choices are:

$5,006.00

B $5,018.75

C $5,025.00

D $5,028.75

The correct option is B,$5018.75

Explanation:

The key to unlock this question is to know that government securities are usually quoted in 1/32 nds ,which means that in calculating the price  the number after 100 is is multiplied by 1/32.

1M means 1000,while 5M means 5000

The price of 5M=5000*(100+12*1/32)%

The price of 5M=5000*(100+0.375 )%

The price of 5M=$5018.75

In this case the bid price which is lower is used when selling securities to the dealer

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I hope this helps
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