This week’s study question from the Solomon Online Exam Simulator question database is now available.
How much would you pay for a $1,000 10-year Treasury bond priced at 101.08 (excluding accrued interest)?
Correct Answer: C. $1,012.50
Rationale: Treasury bonds are typically priced in percentage points of par and in fractions of 32nds of percentage points. For example the .08 of the quote should be understood as 8/32nds of a percentage point or .25%. Thus, 101.08 is equivalent to 101.25% of par which is $1,000 x 101.25 which is $1,012.50.
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