Question

The 7.55 percent 07 bonds of StatusQuo, Inc. currently yield 11 percent. The bonds traded at a low of 71.25 and closed today at 71.625 up 0.75. The closing price yesterday was:

a) 65.125
b) 70.875
c) 69.875
d) 72.375

Answer 1

To find the closing price of StatusQuo, Inc. bonds yesterday, subtract 0.75 from today's closing price of 71.625, yielding a result of 70.875.

Step-by-step explanation:

The question asks us to determine the closing price of StatusQuo, Inc. bonds yesterday, given that today they closed at 71.625 and were up by 0.75 from yesterday. To find the closing price for yesterday, we subtract 0.75 from today's closing price. Therefore, the calculation is 71.625 - 0.75, which equals 70.875.

So, the closing price of the bonds yesterday was 70.875. This figure corresponds with choice (b) from the options given in the question. It's important to note that bond prices fluctuate due to changes in market interest rates, and when market interest rates rise, bonds with lower interest rates typically decrease in value, which is why the StatusQuo, Inc. bonds, which have a 7.55% coupon rate but currently yield 11%, are trading below their face value.