Question: Was having difficulty this practice problem set. Could you please help? Thank you so much! (a) (6 points) If the annual percentage rate (APR) is
Was having difficulty this practice problem set. Could you please help? Thank you so much!


(a) (6 points) If the annual percentage rate (APR) is 10.25% compounded annually what is the price of an 8% 10 year semi-annual coupon bond with a face value of $1000. (b) Bellow assume you can buy and sell a fraction of a bond, and that you are allowed to sell a security even if you do not own it (i.e., short selling is allowed). You are given the following bond prices: Bond A: a 1 year zero coupon bond with a face value of $100 and price of $90 Bond B: a 2 year zero coupon bond with a face value of $100 and price of $70 i. (5 points) What should be the price of a 2-year bond with face value of $3000 and a 10% annual coupon rate? ii. (7 points) Show how you can make an arbitrage profit if the price of a 2-year bond with face value of $3000 and a 10% annual coupon rate is $2600 (show the arbitrage table in detail) (a) (6 points) If the annual percentage rate (APR) is 10.25% compounded annually what is the price of an 8% 10 year semi-annual coupon bond with a face value of $1000. (b) Bellow assume you can buy and sell a fraction of a bond, and that you are allowed to sell a security even if you do not own it (i.e., short selling is allowed). You are given the following bond prices: Bond A: a 1 year zero coupon bond with a face value of $100 and price of $90 Bond B: a 2 year zero coupon bond with a face value of $100 and price of $70 i. (5 points) What should be the price of a 2-year bond with face value of $3000 and a 10% annual coupon rate? ii. (7 points) Show how you can make an arbitrage profit if the price of a 2-year bond with face value of $3000 and a 10% annual coupon rate is $2600 (show the arbitrage table in detail)
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