|
Question 1082479: A $5000 bond had a selling price of $4500. What was the quote price?
Answer by math_helper(2461)   (Show Source):
You can put this solution on YOUR website!
The quoted price was $4500/$5000 * 100 = 90
---
A quoted price of 100 indicates a bond is "at par" (and hence yielding very close or at its coupon)
A quoted price of <100 indicates a bond is "trading below par" and hence is yielding ABOVE its coupon, a bond's yield is inversely proportional to its trading price.
A quoted price of >100 indicates a bond is "trading above par" and hence is yielding LESS than its coupon.
Of course these yields pertain to the prospective buyer, and do not necessarily reflect the yield the current owner is getting. As bond prices go up, yield goes down, and vice-versa. Bonds work this way because they pay out a fixed amount of dollars (the coupon) for each bond issued.
|
|
|
| |
