TOX bond 7.55 yields 11%. The bond traded at a low of 71.25 and closed today at 71.625 + 0.75. The closing price yesterday was:

Question

Quizplus · Accepted Answer

We can use the information provided about the yields and the low traded price to calculate the bond's initial face value (par value):

Initial Face Value = Low Traded Price / (1 + Yield/100) = 71.25 / (1 + 11/100) = 63.973

Since the bond closed today at 71.625 + 0.75, we know that its new price is 72.375. We can use this new price and the initial face value to calculate the change in percentage:

Change = (New Price - Initial Face Value) / Initial Face Value * 100% = (72.375 - 63.973) / 63.973 * 100% = 13.16%

Now we can calculate the bond's closing price yesterday using the following formula:

Closing Price Yesterday = (Initial Face Value * (1 + Change/100)) - Accrued Interest

Since we don't have any information on the accrued interest, we can assume it is negligible for this problem. Plugging in the values we have:

Closing Price Yesterday = (63.973 * (1 + 13.16/100)) = 72.125

Therefore, the answer is D) 70.875.

TOX Bond 7