You have decided to take on the following contract: The contract delivers $10M face value of...
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You have decided to take on the following contract: The contract delivers $10M face value of 9-year bonds in one year from now. You will pay for the bonds in 2 years. The current term structure is flat at an annualized rate of 4%. Compute the cashflow at T=2 for the contract. Suppose after you sign the contract, interest rates go up to 5.2%. What is the change in value of the contract that you signed? You have decided to take on the following contract: The contract delivers $10M face value of 9-year bonds in one year from now. You will pay for the bonds in 2 years. The current term structure is flat at an annualized rate of 4%. Compute the cashflow at T=2 for the contract. Suppose after you sign the contract, interest rates go up to 5.2%. What is the change in value of the contract that you signed?
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To compute the cash flow at T2 for the contract we need to determine the price of the bonds at T1 us... View the full answer
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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