Multiple Choice
A corporate bond is a corporation's written pledge to repay a specified amount of money along with:
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11. Long Term Liabilities
Introduction to Bonds and Bond Characteristics
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What is the price of a $1,000 face value bond if the quoted price is 102.1?
A
$1,210
B
$1,100
C
$1,021
D
$1,002.10
Verified step by step guidance1
Step 1: Understand the problem. The quoted price of a bond is expressed as a percentage of its face value. In this case, the quoted price is 102.1%, and the face value of the bond is $1,000.
Step 2: Convert the quoted price percentage into a decimal by dividing it by 100. For example, 102.1% becomes 1.021.
Step 3: Multiply the decimal form of the quoted price (1.021) by the face value of the bond ($1,000). This calculation gives the price of the bond.
Step 4: Write the formula for the bond price calculation: \( \text{Bond Price} = \text{Quoted Price (decimal)} \times \text{Face Value} \). Substitute the values into the formula.
Step 5: Perform the multiplication to find the bond price. The result will be the price of the bond based on the quoted price.
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