Answer :
A $1,500 bond quoted at 98.5 is selling for $1,478 when rounded to the nearest whole dollar. The selling price is calculated as 98.5% of the bond's face value.
The relationship between the selling price and the interest rate is that when the interest rates in the market rise, the selling price of existing bonds usually decreases to make them more attractive to buyers seeking higher yields.
Conversely, when market interest rates fall, the selling price of bonds might increase above their face value because they carry a higher interest rate than what is currently available in the market.
To find the selling price of the bond, multiply the face value by the quoted percentage. Therefore, the selling price of the bond can be calculated by taking 98.5% of $1,500.
The calculation is as follows:
0.985 * $1,500 = $1,477.50
To round the answer to the nearest whole dollar, the bond is selling for $1,478.
