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Suppose that you own the T 3.50 2/15/2018 trading at 108.1875/108.2031 and you have the accompanying zero coupon spot (BEY) yields. Period Spot (BEY) 1
Suppose that you own the T 3.50 2/15/2018 trading at 108.1875/108.2031 and you have the accompanying zero coupon spot (BEY) yields.
Period | Spot (BEY) |
1 | .0800% |
2 | .1850% |
3 | .3343% |
4 | .5010% |
5 | .6167% |
6 | .8189% |
A. Compute the asked yield (BEY) on the note
B. Compute the fundamental value of the note.
C. Does the current price of the T 3.50 reflect its fundamental value?
D. What actions will cause the note to move back to its fundamental value?
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