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Consider following term structure of Treasury bill 6-month Period Rate 1 1.50% 2 1.70% 3 2.11% 4 2.98% 5 3.71% 6 4.01% 7 4.82% 8
Consider following term structure of Treasury bill 6-month Period Rate 1 1.50% 2 1.70% 3 2.11% 4 2.98% 5 3.71% 6 4.01% 7 4.82% 8 5.13% 5.45% 10 6.25% 25. Suppose a semi-annual bond with 5 year maturity that has 13% as annual coupon rate. If you want to short futures contract with this bond at $1020, how much of a dollar profit would you realize if the maturity of this futures is after fourth coupon payment? (hint: current price of bond - PV of all future remaining coupon payment and face value.)
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