Assume that a face value of $1,000 for each type of bond. Yields are calculated to full maturity with semi-annual compounding. Yield change is the change in ask yield from the previous close.

$\begin{array}{|l|r|l|r|r|r|r|r|}
\hline \text { Issuer } & \text { Coupon } & \begin{array}{l}
\text { Maturity } \
\text { Date }
\end{array} & \begin{array}{r}
\text { Bid } \
\text { Price }
\end{array} & \begin{array}{r}
\text { Ask } \
\text { Price }
\end{array} & \begin{array}{r}
\text { Bid } \
\text { Yield }
\end{array} & \begin{array}{r}
\text { Ask } \
\text { Yield }
\end{array} & \begin{array}{r}
\text { Yield } \
\text { Change }
\end{array} \
\hline \text { Pipa Co. } & 7.500 & 2012-\text { Aug-24 } & 120.92 & 121.02 & 5.41 & 5.37 & +0.011 \
\hline \text { Harolds Inc. } & 8.000 & 2025 \text {-Jan-10 } & 84.33 & 84.63 & 5.02 & 4.88 & +0.003 \
\hline \text { Willie Ltd. } & 6.250 & 2018-O c t-1 & 89.47 & 89.89 & 5.19 & 4.97 & -0.016 \
\hline \text { Kat Enterprise } & 8.250 & 2013-M a r-13 & 109.09 & 109.49 & 5.34 & 5.28 & -0.009 \
\hline
\end{array}$

-Suppose you purchase 5 Harolds bonds on this day. How much would you pay?
A) $4,623.00
B) $4,232.00
C) $5,000.00
D) $3,864.00
E) $423.20

Question

Assume that a face value of $1,000 for each type of bond. Yields are calculated to full maturity with semi-annual compounding. Yield change is the change in ask yield from the previous close.

$\begin{array}{|l|r|l|r|r|r|r|r|}
\hline \text { Issuer } & \text { Coupon } & \begin{array}{l}
\text { Maturity } \
\text { Date }
\end{array} & \begin{array}{r}
\text { Bid } \
\text { Price }
\end{array} & \begin{array}{r}
\text { Ask } \
\text { Price }
\end{array} & \begin{array}{r}
\text { Bid } \
\text { Yield }
\end{array} & \begin{array}{r}
\text { Ask } \
\text { Yield }
\end{array} & \begin{array}{r}
\text { Yield } \
\text { Change }
\end{array} \
\hline \text { Pipa Co. } & 7.500 & 2012-\text { Aug-24 } & 120.92 & 121.02 & 5.41 & 5.37 & +0.011 \
\hline \text { Harolds Inc. } & 8.000 & 2025 \text {-Jan-10 } & 84.33 & 84.63 & 5.02 & 4.88 & +0.003 \
\hline \text { Willie Ltd. } & 6.250 & 2018-O c t-1 & 89.47 & 89.89 & 5.19 & 4.97 & -0.016 \
\hline \text { Kat Enterprise } & 8.250 & 2013-M a r-13 & 109.09 & 109.49 & 5.34 & 5.28 & -0.009 \
\hline
\end{array}$

-Suppose you purchase 5 Harolds bonds on this day. How much would you pay?
A) $4,623.00
B) $4,232.00
C) $5,000.00
D) $3,864.00
E) $423.20

Quizplus · Accepted Answer

To calculate how much would you pay for 5 Harolds bonds, we need to use the ask price of the bond, which is $84.63.

The face value of each bond is $1,000, so the total face value of 5 bonds is $5,000.

To find out how much we will pay, we need to calculate 5% of the face value, because the coupon rate is 8% annually and it pays semi-annually. The semi-annual coupon payment would be $40 (=$1,000*8%/2).

For 5 bonds, the semi-annual coupon payment would be $200 (=$40*5).

Therefore, the total cost of 5 Harolds bonds would be:

$4,232.00 (=$84.63*5*100/100 + $200)

So the answer is B.

Assume That a Face Value of $1,000 for Each Type