Question

The following bond was quoted in The Wall Street Journal:

Bonds
NJ 4.125% 35
Current yield Volume
2.3%
5
Close
109.875%
Net change
+1.125%
Four bonds were purchased yesterday, and 4 bonds were purchased today. How much more did the 4 bonds cost today? (Do not
round intermediate calculations. Round your answer to the nearest cent.)
Increased cost

Answer 1

Answer:

$100 answers your question

Answer 2

The increased cost for the 4 bonds purchased today, based on The Wall Street Journal's quoted values (Bonds=NJ 4.125% 35, Current yield=2.3%, Volume=5, Close=109.875%, Net change=+1.125%), is $790.16.

Let's break down the steps to calculate the increased cost for the 4 bonds purchased today:

Calculate the face value of one bond:

`\begin{aligned}& \text { Face Value }=\frac{\text { Annual Interest }}{\text { Current Yield }} \\& \text { Face Value }=(4.125 \% * 100)/(2.3 \%) \\& \text { Face Value } \approx (4.125)/(0.023) \\& \text { Face Value } \approx 179.35\end{aligned}`

Calculate the cost of one bond purchased today:

`\begin{aligned}& \text { Cost of One Bond }=1.09875 * \text { Face Value } \\& \text { Cost of One Bond }=1.09875 * 179.35 \\& \text { Cost of One Bond } \approx 197.54\end{aligned}`

Calculate the increased cost for the 4 bonds purchased today:

`\begin{aligned}& \text { Increased Cost }=4 *\text { Cost of One Bond } \\& \text { Increased Cost }=4 *197.54 \\& \text { Increased Cost }\approx 790.16\end{aligned}`

Therefore, the increased cost for the 4 bonds purchased today is approximately $790.16. Rounded to the nearest cent, the answer is $790.16.