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A bond quoted as 98.2 is trading on the secondary market for

A bond quoted as 118.3 is trading on the secondary market

for

Answer :

A bond quoted as 98.2 indicates that it is trading below its face value or par value, suggesting a discount. A bond quoted as 118.3 indicates that it is trading above its face value, indicating a premium.

When a bond is quoted as 98.2, it means that the bond is trading at 98.2% of its face value. This implies that the bond is trading at a discount because the market price is below the par value of the bond. Investors are willing to pay less than the face value for the bond due to factors such as changes in interest rates, credit risk, or time to maturity.

On the other hand, when a bond is quoted as 118.3, it means that the bond is trading at 118.3% of its face value. This indicates that the bond is trading at a premium, meaning investors are willing to pay more than the face value for the bond. This can occur when the bond offers attractive coupon payments or if interest rates have fallen since the bond was issued.

The quoted prices in the secondary market reflect the supply and demand dynamics of the bond, as well as investors' expectations and perceptions of the bond's risk and future cash flows.

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