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You are given the following details of four default free government bonds. Assume that one can take long (buy) and short (sell) positions in these
You are given the following details of four default free government bonds. Assume that one can take long (buy) and short (sell) positions in these bonds. CF stands for cash flow. Table for Problem 5 Bond CF Year 1 CF Year 2 CF Year 3 Current price Today A D 95.240 100 0 0 B 90.340 0 100 0 87.245 0 0 100 D X 110 110 1,110 What is the current theoretical price of Bond D, as per the no-arbitrage principle? In other words, what should be the value of X? [Round-off your final answer to four decimals to obtain as accurate answer as possible on Canvas.]
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