Question
In the bond market you are given the following information. All amounts are in the US dollar. CF stands for cash flows and all bonds
In the bond market you are given the following information. All amounts are in the US dollar. CF stands for cash flows and all bonds mature in Year 3. One can buy or sell only integer quantity of bonds. Based on the no-arbitrage principle, what is the price of Bond C today? In other words, what is X?
(Round-off to at least four decimals, in order to get as accurate answer as possible on canvas.)
|
| Price Today | CF Year 1 | CF Year 2 | CF Year 3 |
|---|---|---|---|---|
| Bond A | 94.00 | 4 | 4 | 104 |
| Bond B | 108.00 | 7 | 7 | 107 |
| Bond C | X | 6 | 6 | 106 |
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Handbook Of Asset And Liability Management Volume 2
Authors: S. A. Zenios, W. T. Ziemba
1st Edition
0444528024, 978-0444528025
