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Part 1
Bond prices and yields   Assume that the Financial Management​ Corporation's ​$1 comma 000
​-par-value
bond has a 7.100 %

​coupon, matures on May​ 15, 2027, has a current price quote of 105.456

and a yield to maturity​ (YTM) of 5.712 %
.
Given this​ information, answer the following​ questions:
a.  What was the dollar price of the​ bond?
b.  What is the ​bond's current​ yield?
c.  Is the bond selling at​ par, at a​ discount, or at a​ premium? ​ Why?
d.  Compare the​ bond's current yield calculated in part b to its YTM and explain why they differ.
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Part 1
a.  The dollar price of the bond is ​$enter your response here
.
​(Round to the nearest​ cent.)

To solve these questions, let's address each part step by step. The given information is as follows:

- Par value (Face value of the bond) = $1,000
- Coupon rate = 7.100% annually
- Maturity date = May 15, 2027
- Current price quote = 105.456
- Yield to Maturity (YTM) = 5.712%

### Part a: Dollar Price of the Bond

The bond's dollar price is determined by its price quote. Price quotes for bonds are expressed as a percentage of the bond's par value. So, if the price quote is 105.456, the bond is selling for 105.456% of its par value.

The dollar price of the bond can be calculated as:
\[
\text{Dollar Price} = \left(\frac{\text{Price Quote}}{100}\right) \times \text{Par Value}
\]
Substituting the values:
\[
\text{Dollar Price} = \left(\frac{105.456}{100}\right) \times 1,000
\]
Let me calculate that.The dollar price of the bond is **$1,054.56**.

### Do you have any questions so far or would you like to proceed with the next part?

Here are some related questions:
1. How does a bond's price relate to its par value?
2. Why might a bond trade above its par value?
3. What factors affect a bond's yield to maturity?
4. How is the coupon rate different from the current yield?
5. What happens to bond prices as the maturity date approaches?

**Tip:** Bonds with a price quote above 100 are selling at a premium, while those below 100 are at a discount.

Assume that the Financial Management Corporation's $1,000-par-value bond has a 7.100% coupon, matures on May 15, 2027, has a current price quote of 105.456, and a yield to maturity (YTM) of 5.712%. Given this information, answer the following questions: a. What was the dollar price of the bond? b. What is the bond's current yield? c. Is the bond selling at par, at a discount, or at a premium? Why? d. Compare the bond's current yield calculated in part b to its YTM and explain why they differ.

Learn how to calculate the dollar price, current yield, and bond classification (par, discount, or premium) for a Financial Management Corporation bond with a 7.1% coupon rate, maturing in 2027. This example demonstrates bond pricing formulas and the relationship between yield to maturity and current yield.

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