4
QuizMultiple Choice

Buying Bonds

Question 4 • 26-27 Ignite Financial Literacy Personal Finance - EL3403

Eva follows the bond market and often purchases bonds issued by Sanden Research Labs. Last year, she purchased three such bonds in January, one in May, and four in June, then sold them all in November. Sanden Research Labs bonds were selling at 78.430 in January, 95.652 in May, 86.220 in June, and 87.454 in November. If each bond she purchased had a par value of $500, how much profit did Eva gain from buying and selling these bonds?

Answer
A
$23.81
B
$238.10
C
$20.60
D
$119.05

Explanation

Bond prices are quoted as percentages of par value. Eva paid $1,176.45 for the January bonds (3 × $500 × 0.78430), $478.26 for the May bond, and $1,724.40 for the June bonds, for a total cost of $3,379.11. She sold all 8 bonds for $3,498.16 (8 × $500 × 0.87454), so her profit was $3,498.16 − $3,379.11 = $119.05, choice D.

AI-written and checked against the verified answer.

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