Question

Calculate the closing price of a bond that has a face value of $1000 and is closing at 101 7/8% of the face value.

A) $1001.78
B) $1000.78
C) $1018.75
D) $1000.75

Answer 1

To calculate the closing price of the bond, multiply the face value of the bond by 101 7/8%.

Step-by-step explanation:

To calculate the closing price of a bond that is closing at 101 7/8% of the face value, we need to determine the value of 101 7/8% of $1000.

To do this, we convert the mixed fraction into a decimal. 7/8 = 0.875.

We then multiply $1000 by 1.01875 (which is 101.875% in decimal form) to find the closing price: $1000 x 1.01875 = $1018.75.

Therefore, the correct answer is C) $1018.75.