Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Mr William is holding 15 untradable bonds with a nominal value of R 1,000,000 with a coupon of 15% and 5 years to maturity. The

Mr William is holding 15 untradable bonds with a nominal value of R 1,000,000 with a coupon of 15% and 5 years to maturity. The bond is priced at a premium YTM of 20 points above a tradable bond with nominal value of R 1,000,000 with a coupon rate of 12% and 4 years to maturity. The tradable bonds trades at YTM of 9%. Both bonds pay coupons semi-annually and the duration for the untradable and tradable bond is given as 7.66 and 6.66 years respectively (assume the contract size for the futures is R100,000).

what is the mduration of both tradeable and untradable bonds

How many future contracts does William need to sell short to cover my long position in the untradable bond

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Market Regulations And Finance

Authors: Ratan Khasnabis, Indrani Chakraborty

2014th Edition

8132217942, 978-8132217947

More Books

Students also viewed these Finance questions