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Consider a 6-month bond, which pays INR 50 each month for 5 months and then a face value of INR 100. a) If the bond
Consider a 6-month bond, which pays INR 50 each month for 5 months and then a face value of INR 100. a) If the bond is offered to you directly by the bond issuer, what is the most that you would pay for this? The safe interest rate in the market is 10 percent per month. b) If the bond is valued in the secondary market for bonds at INR 300 and this value has been increasing lately, explain the best strategy that a rational investor should adopt in order to make money on this. Are profits certain with this strategy? What are the risks?
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