Treasury Bonds

If a U.S. Treasury bond is quoted at 92-16, the price of the bond is: A) $92.50. B) $92.16. C) $925.00. D) $92,160. A or C?

A ) —> 92 + 16/32 = 92 + 0.5 = 92.5


Answer is C… They are assuming 1000 as face value… Is there any general rule that face value of bond is 1000?

simple answer you need to know is it is 92.5% of the par value. Usual bond convention is I believe to use a 1000$ par.

I’d go with that really cautiously. I think they sell treasuries with par between 100 and 100,000 and bills at 1M

having previously spent many years as a market maker of treasuries for a US bank, I would be quite happy to say the answer is A…madanalyst has nailed it!

Except the answer is C.


I don’t like this question.

Par value is usually 1,000.

C is very spurious…as far as I can tell…That is what is so tedious with this CFA on occasion…they want you to understand things in their way and not neccesarily market convention.

Particularly because the par amount is not very important. It’s like “Uh, what are on-the-run treasuries costing?” “92-16” “OK give me $10M par of that”

If they wanted to divert you towards C, they could have used the term clean price perhaps, but just price in the question???

“If a U.S. Treasury bond is quoted at 92-16” means 92-16 is the clean price. In the US all bonds are quoted clean and US Treasuries are quoted clean everywhere.

Am I missing something? Why would clean vs. dirty price have made any difference in the choice of A vs. C?

With price they are quoted in /32nds… I have never bought / sold on a proceeds ammount for a bond quote…the only reason I mentioned clean price was that answer C is effectively a clean price proceeds ammount, as in no accrued…it was the only way I could think you might interpret the price to be C,where as in the real world away from textbooks and forums 92-16 as a price is interpreted as ninety two and a half. Maybe it is just easier to say, 2’s are 16 to the plus than 925,000 to 925,156.25 I appreciate I have little idea about this, compared to most on this board, however, also on my resume, I am somehow a registered options market maker at eurex and even found some of the options questions slightly different to market practice in the text! Just pointing out that the curriculum is the curriculum and a little (perceived) knowledge can be a little dangerous on occasion!

^ Right. This test is pretty academic and market practice and an acedmic view of market practice are not necessarily the same. It’s an odd question - if someone says 92-16 you should think 92.5% of par not some dollar amount.