The price of a zero-coupon bond is $850.00 today. Assuming interest rates are 4.0% and estimated...
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The price of a zero-coupon bond is $850.00 today. Assuming interest rates are 4.0% and estimated with continuous compounding. a. What would be the fair price today of a futures contract on this bond deliverable in 9 months? (2 points) b. If the Futures contract is available today at a price of $890.49, what arbitrage transaction would be profitable? (1 Point) • Buy the futures contract, short the bond • Sell the futures contract, buy the bond Buy the futures contract, buy the bond Sell the futures contract, Sell the bond c. What would be the arbitrage profit? (2 Points) The price of a zero-coupon bond is $850.00 today. Assuming interest rates are 4.0% and estimated with continuous compounding. a. What would be the fair price today of a futures contract on this bond deliverable in 9 months? (2 points) b. If the Futures contract is available today at a price of $890.49, what arbitrage transaction would be profitable? (1 Point) • Buy the futures contract, short the bond • Sell the futures contract, buy the bond Buy the futures contract, buy the bond Sell the futures contract, Sell the bond c. What would be the arbitrage profit? (2 Points)
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Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
Posted Date:
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