Question
A current 10-year bond. Face value: $1,000.00 Annual coupon rate: 3.25%. Bond price: $864.87 Yield on bond: 5.00%. A 3-year forward contract exists on this
A current 10-year bond.
Face value: $1,000.00 Annual coupon rate: 3.25%. Bond price: $864.87 Yield on bond: 5.00%. A 3-year forward contract exists on this bond.
If the Forward price is $875.00, how can you perform an arbitrage strategy?
a. Long Forward, Short Bond, Place at 5%. b. Long Forward, Short Bond, Borrow at 5 c. Long Bond, Short Forward, Invest at 5%. d. Long Bond, Short Forward, Borrow at 5 e. None of the above
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Principles Of Managerial Finance
Authors: Lawrence J. Gitman, Chad J. Zutter
13th Edition
9780132738729, 136119468, 132738724, 978-0136119463
