Suppose that a 2-year, 5% annual coupon payment government bond can be bought or sold at a price of 103 (per 100 of par value). Is there an opportunity for coupon-stripping or bond reconstitution? Assuming a par value of $98100 million and neglecting transactions costs, calculate the profit opportunity.

Answer rating: 100% (QA)

The present value of the 2year 5 coupon payments on a 98100 million par ... View the full answer