Bond Market Price

[gargi.adhikari]

In reference to:-
Instructional Video: Tuckman, Chapters 1, 2, 3, 4
The market price of the Bond is given at 101 12 3/4 which translates to 101.40. 12 3/4 =12.75.
My question is why are we dividing 12.75 by 32 ? Where did the 32 come from ?

 

[brian.field]

As a convention, U.S. Treasury bonds are quoted in 32s, so a price of 100-08 is the same as 100 and 8/32 or 100 1/4 = 100.25.

Similarly, a price of 100-12.75 is the same as 100 and 12.75/32.

 

[ShaktiRathore]

Hi,
please see: https://forum.bionicturtle.com/threads/calculation-on-bond-price.6136/#post-19317
thanks

 

[gargi.adhikari]

@brian.field Thanks so much !

 

[QuantMan2318]

In case, it interests you, there is a historical phenomena to dividing the US Treasury Bond prices by 32; It used to be that when the Bonds were first formulated, famously by Alexander Hamilton, and adopted later on after considerable debate by the Founding Fathers, there was a 'Shilling' in US similar to the term used in the UK that was 32 cents to a Dollar, therefore the 's' in the US Bond prices stuck and came to be 1/32 of a Dollar .

@David Harper CFA FRM, I am sure that this was what I saw in a book on US Financial history, "Every Man a Speculator", can you confirm this for me please?

 

[gargi.adhikari]

@QuantMan2318 Thanks so much for that little piece of background behind - yes I was curious - you bet but hesitated to ask another dumb question...