CFA Practice Question
You see a quote of 99:46 for a government bond in the newspaper. The price of the bond is ______.
A. 99.46% of par
B. 100.44% of par
C. Neither of the above answers
Explanation: The printed price is actually an error. Government bond prices are quoted in thirty-seconds of a point; hence, you should never see a number larger than 31 after the colon in a quoted price. The referenced quote of 99:46 is equivalent to a quote of 100:14, and 100 14/32 = 100.44.
User Contributed Comments 24
| User | Comment |
|---|---|
| gruszewski | What a question! I hope I understand explanation 99 + 46/32 = 100+14/32 = 100,44% of par. |
| timspear | Checked the Wall Street Journal and they write 99 + 12/32 as 99:12, not as 99.12. |
| german | well at least nobody forgets this question and the convention! |
| nsmwaura | Looks like a bootleg question... but I guess it hammers the point home |
| Hope02 | Well, Well, Well... Somebody get me some water! |
| PRICHARD | dont be angry hope02, i think many of us were trapped by this question |
| vikram59 | wow! the really know how to anger someone |
| chamad | Thanks gruszewski: Your undestanding helped me to better understand the question. |
| ml42085 | I thought I forgot everything when I read this question... |
| aravinda | Frankly speaking I was wrong on this as well... Looking at the explanation...here is what I(I think) they are talking about.... The governament bond prices are ALWAYS quoted as 32 seconds of a point. That is if the quote price is say, 95:32 >> 99* 1/32 and similarly, if the quote is 99:32, the price is 99*1/32.. But in this question...it is quoted at 99:42 and which is 14 seconds more than 32. So actually this quote is an error where as the correct one should be 100:14 Well, I think I can only remember it this way... appreciate any other comments |
| Shalva | I was also wrong... But I'll never forget this point in future. |
| SuperKnight | Aravinda, i think you have it wrong. Here is how it works, 99:42 means.. 99 + 42/32 .. anything after the ":" is the numerator to the fraction over 32.. x/32, in this case 42/32.. so 99:32 would be 99 + 32/32, or 100, not 99 + 1/32... and 100:14 would be 100 + 14/32.. or 99.4375 % of par.. |
| apiccion | Nails it in quite well. Like a nail-gun to the head. |
| dmfcrowe | Printed price is an error... hence C is what I thought. Actually did work out that it was equal to 100.44 but thought it was too rediculous. |
| pstebelp | Lol |
| Kashi2010 | So much for no trick questions..! |
| kutch | well done gruszewski |
| erinelize | Are you serious? |
| Insipidity | Wow ... just wow. |
| RAustin | WOW!! |
| Downgrade | no bond would ever be quoted w the the 32'nds adding up higher than a point. It would be 100:12.... |
| Ifi2703 | 46/32 = 1.4375 99 + 1.4375 = 100.4375 Which is the right answer! |
| praj24 | Lol this question pretty much summed up my first mock... long way to go! |
| will080912 | I didn´t even select an answer, just skip the question |