Solution and explanation:
Given data:
Ask price: 98.4062, bid price: 98.2812, par value of the bond: $10,000
The following formula is used in order to calculate the actual value of the bond
The ask price will be used while calculating the actual value of the bond and the par value of the bond will be used
Ask price will be multiplied with par value of the bond and divided by 100
[tex]98.4062(10000) / 100[/tex]= $9840.62
Therefore, the par value as per the above calculation is $9840.62
Answer:
98.4062 (10,000)/100 = $9840.62
Explanation:
A bond price is the last price at which a bond is traded, expressed as a percentage of the nominal value and converted into a point scale. The face value is generally set at 100, which corresponds to 100% of the face value of a $ 1,000 bond. For example, if a corporate bond is quoted at 99, it means that it is trading at 99% of its nominal value. In this case, the purchase cost of each bond is $ 990. Treasury government bonds with a term of more than 10 years but less than 30 years. Treasury bonds pay a fixed interest rate each year. Interest payments are made twice a year. Investors receive the nominal amount of the bond at maturity.
