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20, Yeu are a bond manager, looking for arbitrage opportunity in a 2-year 8% annual payment treasury coupon bond trading at $998 today. Suppose, you

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20, Yeu are a bond manager, looking for arbitrage opportunity in a 2-year 8% annual payment treasury coupon bond trading at $998 today. Suppose, you aso observe the following for today's 2-year treasury spot rate 8.465% 1-year pure discount treasury bond trading at $950 s there arbitrage opportunity? What should you buy and sell? A. No, all bonds are fairly priced 8. Yes, there is arbitrage profit to make. Buy the package of STRIPS and sell the treasury coupon bond. C. Yes, S4 arbitrage profit to make. Buy the coupon bond and sell the package of D. depends on YTM One year ago, Alpha Supply issued 15-year bonds at par. The bonds have a coupon rate of 65 percent and pay Today, the market rate of interest on these bonds is 7.2 percent. How does the price of these bonds today compare to the issue price? A. increase. B. decrease. C. remain unchanged D. not enough information to determine 12. A $1,000 face value bond currently has a yield to maturity of 6.69 percent. The currently has a yield to maturity of 6.69 percent. The bond matures in three years and pays interest annually. The coupon rate is 7 percent. What is the current price of this bond? A. $949.60 B. $1,005.26 C.$1,008.18 D. $1,010.13 An investor purchases thebonds ofADCorp. which pay an ann annual yield to maturity of 12%. The bonds will most likely be selling at: 13. ual coupon of 10% and mature in 10 years, at an A. A discount B. A premium . Par D. depends on market price 14. A 7.5% coupon, semiannual-pay, five-year bond has a yield to maturity of 6.80%. Over the next year, if the bond's vield to maturity remains unchanged, its price will A. increase. B. decrease. C. remain unchanged. eeiu nematio to determine Deltona Motors just issued 225,000 pieces of zero coupon bonds. Each $1,000, and has a yield to maturity of 7.45 percent. W raised from issuing these bonds? (Assume semiannual compounding.) A. $48.20 million B. $52.10 million C. $55.14 million D. $162.08 million 15. piece matures in 20 years, has a par value of hat is the approximate total amount of money the company 16. A 3-year spot rate is least likely the: A. yield-to-maturity on a 3-year coupon bond. B. yield-to-maturity on a 3-year zero-coupon bond. C. appropriate discount rate on the year 3 cash flow for a 10-year bond. D. none of above

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