A financial institution requesting a quote on a block of 100 bonds from a dealer in government securities receives a quote of 98.02 bid, 98.06 asked. What is the dollar amount the institution will receive if the financial institution sells these bonds to the dealer?’’
Explanation
Answer: A - $98,062.50. The financial institution receives the bid price, which is 98 and 2 / 32. Two thirty-seconds is $0.625. The 98 is the percentage of a $1,000 bond. Multiplying 98% by $1,000 results in $980. Add $0.625 to $980 to arrive at $980.625 per bond. But…there are 100 bonds. So, multiplying $980.625 by 100 equals $98,062.50.
