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Consider following term structure of Treasury bill Period 6-month Rate 1 1.50% 2 1.70% 3 2.11% 4 2.98% 5 3.71% 6 4.01% 7 4.82% 8
Consider following term structure of Treasury bill
Period | 6-month Rate |
1 | 1.50% |
2 | 1.70% |
3 | 2.11% |
4 | 2.98% |
5 | 3.71% |
6 | 4.01% |
7 | 4.82% |
8 | 5.13% |
9 | 5.45% |
10 | 6.25% |
- Suppose a semi-annual bond with 5 year maturity that has 13% as annual coupon rate. If you want to short futures contract with this bond at $1020, how much of a dollar profit would you realize if the maturity of this futures is after fourth coupon payment?
(hint: current price of bond = PV of all future remaining coupon payment and face value.)
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