A bond traded at 102½ means that:
A. The bond pays 2.5% interest.
B. The bond traded at 102.5% of its par value.
C. The market rate of interest is 2.5%.
D. The bonds were retired at $1,025 each.
E. The market rate of interest is 2½% above the contract rate.
Answer
B. The bond traded at 102.5% of its par value.
Explanation:
Bonds generally trade on the stock exchanges at their par value plus any accrued interest for the intervening period. Bonds that are traded at 102.5 means that the par value of the bond is 100 and its current market price is 102.5 and the extra element of 2.5 represents the accrued interest.
