Question
The price of a 100 Par Value T-Bond maturing in 5 years and paying a 3.75% coupon is 98.50. The bond's futures contract settling in
The price of a 100 Par Value T-Bond maturing in 5 years and paying a 3.75% coupon is 98.50. The bond's futures contract settling in 2 months is priced at 97.25. The two month CD rate is .55%. What is the arbitrage profit? Hint: First determine which strategy (buy bond/short futures or sell bond/buy futures) results in an arbitrage profit.
A 0.72
B 1.78
C 0.63
D 1.77
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Financial Management Core Concepts
Authors: Raymond M Brooks
3rd edition
133866696, 978-0133866698
