What Is a Bond Quote?A bond quote is the last price at which a bond traded, expressed as a percentage of par value and converted to a point scale. Par value is generally set at 100, representing 100% of a bond's face value of $1,000. For example, if a corporate bond is quoted at 99, that means it is trading at 99% of face value. In this case, the cost to buy each bond is $990. Show
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Bond QuoteHow a Bond Quote WorksPrice quotes for bonds are represented by a percentage of the bond's par value, which is converted to a numeric value, then multiplied by 10, in order to determine the cost per bond. Bond quotes can also be expressed as fractions. For example, corporate bonds are quoted in 1/8 increments, while government bills, notes, and bonds are quoted in increments of 1/32. Therefore, a bond quote of 99 1/4 represents 99.25% of par. Converting the percentage to 99.25 and multiplying by 10 results in a cost of $992.5 per bond. In addition to being quoted as a percentage of par value, bonds may also be quoted with a yield to maturity (YTM). The bond price and quote the calculation is fairly straightforward, compared to other types of investments. Types of Bond QuotesIn addition to the last price at which a trade occurred, full bond quotes include bid and ask prices, which are calculated in the same manner as the quote on the last trade. The bid is the highest price level buyers are willing to pay for the bond at the time of the quote. For bond sellers seeking immediate trade executions, the bid is the likely price for the trade. The ask is the lowest price level on bonds to be sold at the time of the quote. The difference between the bid and the ask price is known as the "spread." In a full quote, bonds with high levels of liquidity, such as Treasuries, generally have spreads of a few pennies between the bid and the ask price. On the other hand, the spreads on corporate bonds with lower levels of liquidity can exceed $1. For example, a full quote on an illiquid corporate bond could list a last trade of $98, with a bid of $97 and an ask price of $99. Bonds can also be quoted in terms of their yields to maturity, which is commonly done for reference purposes, rather than trade execution. For example, the financial media often quotes the 10-year Treasury note by its YTM, to give investors a reference point for bond price fluctuations. Recommended textbook solutions Krugman's Economics for AP2nd EditionDavid Anderson, Margaret Ray 1,043 solutions Principles of Economics8th EditionN. Gregory Mankiw 1,335 solutions Essentials of Investments8th EditionAlan J. Marcus, Alex Kane, Zvi Bodie 667 solutions Principles of Macroeconomics6th EditionN. Gregory Mankiw 436 solutions Which of the following would be a quote for a US government bond?Which of the following would be a quote for a U.S. Government bond? U.S. Government bonds are quoted on a percentage of par basis in 32nds. 105-20 = 105 20/32nds = 105.625% of $1,000 par = $1,056.25 per bond.
Which of the following securities is the least liquid?Inventory is the least liquid because the rate at which inventory is turned over and converted to cash can take years or not occur at all. Fixed assets have even less liquidity than inventory. A. Marketable securities - is considered a cash equivalent and, therefore, has a higher liquidity than inventory.
Which of the following terms is the chance that the bond issuer will not be able to make timely payments?Credit risk, which is the chance that a bond issuer will fail to pay interest or principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that bond to decline.
Which of the following would represent a quote for a railroad bond?Which of the following would represent a quote for a railroad bond? A railroad bond quote would be a corporate bond. Corporate bonds are quoted in eighths only. Government securities are the only securities quoted using decimals and 32nds.
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A bond is quoted at 99 1/8. from this quote, which of the following can be reasonably concluded?
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