A mutual fund plans to purchase $ 10 million of 20-year T-bonds in two months. The bonds
Question:
a. What type of option should the mutual fund purchase?
b. How many options should it purchase?
c. What is the cost of these options?
d. If rates change + / -50 basis points, what will be the impact on the price of the desired T-bonds?
e. By how much does the value of the call position change if interest rates change + / -50 basis points? Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity. Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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Related Book For
Financial Markets and Institutions
ISBN: 978-0077861667
6th edition
Authors: Anthony Saunders, Marcia Cornett
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