Bonds and Investors?

Question

When an investor purchases a $1,000 par value bond that was quoted at 97.16, the investor ...

a. receives 97.5% of the stated coupon payments.
b. receives $975 upon the maturity date of the bond.
c. pays 97.5% of face value for the bond.
d. pays $1,025 for the bond.

Answer 1

None of those answers are correct -- but C comes closest.

The correct answer is that he pays 97.5% of the face value of the bond PLUS any accrued interest.

Treasury bonds are quoted in 16ths -- so the 16 means half of 32 -- which is why you get 97.16 ==> 97.5%

However, Corporate bonds are quoted differently -- so the 97.16 ==> 97.16%