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You are a bond trader, and there has been a power failure in New York City. You and other traders have taken to a street
You are a bond trader, and there has been a power failure in New York City. You and other traders have taken to a street corner in order to keep trading. You can buy or sell the following bonds with the following cash flows (or CF) at the following prices. All bonds mature at or before the end of Year 3. Refer to following table;
Bond | Price | Coupon | Face Value |
A | 100.00 | 7% | $100 |
B | 95.00 | 3% | $100 |
C | 112.00 | 9% | $100 |
Answer the following table to signify bond arbitrage (All fields need to be filled)
Bond | Price Today | Buy (shares) | Sell (shares) | Cash flow (now) | Cash flow (Y1) | Cash flow (Y2) | Cash flow (Y3) |
A | 100.00 | ||||||
B | 95.00 | ||||||
C | 112.00 | - | 4 | ||||
Total |
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