Asked by Klaudia Kuzia on May 12, 2024
Verified
A bond traded at 102½ means that:
A) The bond pays 2.5% interest.
B) The bond traded at 102.5% of its par value.
C) The market rate of interest is 2.5%.
D) The bonds were retired at $1,025 each.
E) The market rate of interest is 2½% above the contract rate.
Traded
The action of buying or selling securities, such as stocks or bonds, in financial markets.
Par Value
The face value of a stock or bond, representing the amount the security was originally sold for.
- Acquire knowledge on the fundamentals of evaluating bonds and the importance of comparing the market rate with the contract rate.
Verified Answer
TM
Tooba MustafaMay 16, 2024
Final Answer :
B
Explanation :
A bond traded at 102½ means that it traded at 102.5% of its par value. The ½ represents half of a percentage point, so it indicates that the bond is trading above par.
Learning Objectives
- Acquire knowledge on the fundamentals of evaluating bonds and the importance of comparing the market rate with the contract rate.