Question

What is the formula to determine the price of a U.S. Treasury bond listed at 122 if the par value is $5,000?

Multiple choice question.

$5,000 × 1.22%


$1,000 × 122%


$5,000 ÷ 122%


$5,000 × 122%

Answer 1

To determine the price of a U.S. Treasury bond listed at 122 with a par value of $5,000, you can use the following formula:

**Price of the bond = Par value × (Market price as a percentage)**

In this case, the bond is priced at 122, which means 122% of the par value.

So the calculation will be:

Price = $5,000 × 1.22 (which is 122% expressed as a decimal)

Now let's check the given options:

1. $5,000 × 1.22%
2. $1,000 × 122%
3. $5,000 ÷ 122%
4. $5,000 × 122%

The correct formula for this is equivalent to:

**$5,000 × 1.22**

However, since "1.22" is not an option, we see that converting 122% into decimal form does not match any of the options directly, but the intent behind the calculations implies that:

**$5,000 × 122%**

is intended to mean:

**$5,000 × 1.22 (in this context)**.

Thus, the best choice from the given options is:

**$5,000 × 122%**.