Question
Suppose that a 2-year, 5% annual coupon payment government bond can be bought or sold at a price of 103 (per 100 of par value).
Suppose that a 2-year, 5% annual coupon payment government bond can be bought or sold at a price of 103 (per 100 of par value). Is there an opportunity for coupon-stripping or bond reconstitution? Assuming a par value of $98100 million and neglecting transactions costs, calculate the profit opportunity. State the specific trades that capture the profit and show work
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Get StartedRecommended Textbook for
Modern Portfolio Theory and Investment Analysis
Authors: Edwin Elton, Martin Gruber, Stephen Brown, William Goetzmann
9th edition
9781118805800, 1118469941, 1118805801, 978-1118469941
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