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please help,in which case do we use the nominal value as a denominator when calculating the market value of bond, and which case do we use nominal value as a numerator
this question is in reference to December 2012 question 2 (a)
It depends on the question (and you have asked the same thing as a comment on a lecture and I have answered there!)
But you should not simply learn rules about what is the numerator and what is the denominator. Think about what you are trying to do and what information is given – the examiner goes to a lot of trouble to make sure he is testing your understanding and not testing that you have learned rules.
The total nominal value of the bonds is $20M from the SOFP. So given that the nominal value per bond is $100, there are 20M/100 = 200,000 bonds.
Since the total MV is $21M, the MV per bond is 21M/200,000 = $105.
thank you MR John
I didn`t realize that you have answered already, I think I now understand the principle
You are welcome 🙂