Question

Assume today is March 15, 2023. How much would you have to pay for a U.S. Government bond ($1,000 maturity value) issued on February 15, 2023 and scheduled to mature on February 15, 2030 and quoted at 118-07 "bid" and 118-15 "asked"? Assume the accrued interest is exactly $4.64 per $1000 par value.

Choices:
A.$1,189.33
B.$1,004.64
C.$1,193.97

Answer 1

To calculate the price of the U.S. Government bond, we need to understand the bid and asked prices. The bid price is 118-07 and the asked price is 118-15. To find the approximate price of the bond, we calculate the average of the bid and asked prices and add it to the maturity value.

Step-by-step explanation:

To calculate the price of the U.S. Government bond, we need to understand the bid and asked prices. The bid price is the price at which investors are willing to buy the bond, and the asked price is the price at which investors are willing to sell the bond. In this case, the bid price is 118-07 and the asked price is 118-15. We can calculate the average of the bid and asked prices to find the approximate price of the bond. The average is 118-11. To convert this to a decimal, we divide 11 by 32, which gives us approximately 0.34. Multiplying this by $10 gives us $3.40. Adding this to the maturity value of $1,000 gives us a total of $1,003.40.