Question
Treasury Bonds Ask Bid 8 May 00-05 101-8/32 101-4/32 12 May 05 129-29/32 129-23/32 8 7/8 May 00 104-16/32 104-12/32 Treasury Strips May 00 46-21/32
| Treasury Bonds | Ask | Bid |
| 8 May 00-05 | 101-8/32 | 101-4/32 |
| 12 May 05 | 129-29/32 | 129-23/32 |
| 8 7/8 May 00 | 104-16/32 | 104-12/32 |
| Treasury Strips |
|
|
| May 00 | 46-21/32 | 46-08/32 |
| May 05 | 30-10/32 | 29-29/32 |
Consider an investor who sells the 8 May 00-05 callable bond and simultaneously buys a synthetic bond at 98.78, to arbitrage the price discrepancy. How much yield does the investor pick up? Estimate with a modified duration guess.
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Short Term Financial Management
Authors: Terry S. Maness, John T. Zietlow
3rd Edition
0324202938, 978-0324202939
