Question
Q2] A coupon-bearing bond is traded at $900. A forward contract on the bond matures in 6-month. A coupon payment of $20 is expected in
Q2]
A coupon-bearing bond is traded at $900. A forward contract on the bond matures in 6-month. A coupon payment of $20 is expected in 4-month and in 10-month. Assume the risk-free rate is 4% per annum with continuous compounding for all maturities. Calculate the forward price. Suppose the forward price is $910, how to arbitrage? Calculate the arbitrage profit.
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Financial Markets And Corporate Strategy
Authors: Mark Grinblatt, Sheridan Titman
2nd Edition
0071157611, 9780071157612
