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22 . You are presented with the opportunity to invest in the following bonds issued by Alabama ASSUME they have the Same risk AL Bond

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22 . You are presented with the opportunity to invest in the following bonds issued by Alabama ASSUME they have the Same risk AL Bond : F = 100, 0 = 59', ViEld = 59/6, T = 1 YEAR GA Bond :` F = 100, [ = 1096, ViEld = 1090, T = 1 VEER You also have negotiated following lending arrangements with a bank REPO / REVERSE repo with 1 year term ." AV'S repo rate ( must repay 10496 Of loan value*) NO interest on revErSE PEDO 39'6 haircut on both the repurchase agreement and the reverse repurchase agi Marked - to - market daily ( 10 points ) In just a few sentences , describe a potentially profitable convergence trac SCEMario . 6 ) (10 points ) Which bond would you most like to hold in a long position ? Describe how finance that mogition if you want to USE maximum FIFrame . What would your initial poll

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