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3 October, 15:05

The price quotations of Treasury bonds in the Wall Street Journal show an ask price of 104:08 and a bid price of 104:04. As a seller of the bond, what is the dollar price you expect to pay?

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Answers (2)
  1. 3 October, 15:40
    0
    The dollar price you expect to pay is $1041.25

    Explanation:

    Given

    Asking Price = 104:08

    Bidding Price = 104:04

    The bid price of the dealer is calculated as:

    104 + 04 / (04 * 08) %

    = 104 + 4/32 %

    = 104 + 0.125 %

    = 104.125%

    = 1.04125

    Assume that $1,000 represents a unit bond;

    The bid price of the dealer is finally calculated as:

    1.04125 of $1,000

    = $1041.25

    Hence, the dollar price you expect to pay is $1041.25
  2. 3 October, 17:46
    0
    Answer:The price expected to pay $1,041.25

    Explanation:

    Ask price = 104:08

    Bid price = 104:04

    The bid price of the dealer received = 104 4/32 = 0.125

    = 104.125%

    Since bond is usually in $1000 denomination

    104.125% * 1000

    = 1041.25

    =1,041.25

    Therefore the dollar price expected to pay = $1,041.25
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