# Question

Consider Example 6.1. Suppose the February forward price had been $2.80. What would the arbitrage be? Suppose it had been $2.65. What would the arbitrage be? In each case, specify the transactions and resulting cash flows in both November and February. What are you assuming about the convenience yield?

## Answer to relevant Questions

Suppose you observe the following par coupon bond yields: 0.03000 (1-year), 0.03491 (2-year), 0.03974 (3-year), 0.04629 (4-year), 0.05174 (5-year). For each maturity year compute the zero-coupon bond prices, effective annual ...As in the previous problem, consider holding a 3-year bond for 2 years. Nowsuppose that interest rates can change, but that at time 0 the rates in Table 7.1 prevail. What transactions could you undertake using forward rate ...Compute Macaulay and modified durations for the following bonds: a. A 5-year bond paying annual coupons of 4.432% and selling at par. b. An 8-year bond paying semiannual coupons with a coupon rate of 8% and a yield of 7%. c. ...Suppose you observe the following continuously compounded zero-coupon bond yields: 0.06766 (1-year), 0.05827 (2-year), 0.04879 (3-year), 0.04402 (4-year), 0.03922 (5-year). For each maturity year compute the zero-coupon bond ...What is the fixed rate in a 5-quarter interest rate swap with the first settlement in quarter 2?Post your question

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