1215

Given that a Treasury bond has a par value of $50,000 and is currently offered at a quoted price of 98:5, what is the dollar amount that an investor must pay in order to purchase the bond?

A) $98.16.

B) $49,078.13.

C) $4,907,812.50.

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If the quoted price is 98:5 this equals 98 5/32 which equals 98.15625% and means that the dollar amount is:

0.9815625 × $50,000 = $49,078.13

1215

Which of the following is a difference between an on-the-run and an off-the-run issue? An on-the-run issue:

A) is publicly traded whereas an off-the-run issue is not.

B) is the most recently issued security of that type.

C) tends to sell at a lower price.

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An on-the-run issue is the most recently auctioned Treasury issue. An off-the-run issue older issues, when more current issues are brought to market.