The quoted ask yield on a 14-year $1,000 par T-bond with a 7 percent semiannual payment coupon and a price quote of 98-15 is

Question

Quizplus · Accepted Answer

First, convert 98-15 to the decimal form:

98-15 = 98 + 15/32 = 98.46875

Next, calculate the semiannual coupon payment:

$1,000 x 7% / 2 = $35

To calculate the yield, we need to use the bond pricing formula:

98.46875 = $35 / (1 + r/2)^28 + $1,000 / (1 + r/2)^28

Using trial and error or a financial calculator, we can solve for r = 7.18%. Therefore, the answer is B.

The Quoted Ask Yield on a 14-Year $1,000 Par T-Bond