Question
A bond promises a risk-free payment of $1000 in one year. The risk-free rate of interest is 3.11% .a) What is the price of the
A bond promises a risk-free payment of $1000 in one year. The risk-free rate of interest is 3.11% .a) What is the price of the bond? (1 mark )b) If the price of the bond is actually $950, what is the arbitrage strategy? Illustrate all cash flows at time 0 andat time 1.(3 marks)
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Public Finance A Contemporary Application Of Theory To Policy
Authors: David N Hyman
10th Edition
053875446X, 978-0538754460
