question archive A bond traded at 102 1/2 means that: A
A bond traded at 102 1/2 means that: A
Subject:AccountingPrice:2.88 Bought3
A bond traded at 102 1/2 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 2 1/2% above the contract rate.
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The answer is B. The bond traded at 102.5% of its par value.
Bonds are traded and issued at a percentage of their par value. A bond traded at 102.5% of its par value is traded at $1,025 for every $1,000 bond owned. The concept is similar to the issuance when the bond is traded at its present value of its stream of cash flow. The current bond is trading at a premium.
