Question

A bond with face value of $500,000 has a bid quote of 99.1227 and an asked quote of 99.3996. How much will you, an investor, pay to purchase 10 of these bonds

Answer 1

Answer: 4969980

Step-by-step explanation:

Based on the information given in the question, the following can be deduced:

Face value = $500,000

Bid quote = 99.1227

Ask quote = 99.3996

The amount that will be paid by an investor to purchase 10 of these bonds will be:

= 10 × Face value × Ask price

= 10 × 500000 × 99.3996%

= 10 × 500000 × 0.993996

= 4969980