Treasury spot rates (expressed as semiannually pay yields to maturity) are as follows: 6 months 4.0%, 1
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Question:
Treasury spot rates (expressed as semiannually pay yields to maturity) are as follows:
6 months 4.0%,
1 year 4.5%,
1.5 year 5.0%
2 year: 5.5% and
3.5 year: 6.0%.
A 2.5 year, 2.5% Treasury bond is trading at $890. What is the arbitrage trade and how much would profit would you earn from doing the trade?
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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