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You have the following information on three bonds: Credit rating Bond A Bond B Bond C AAA AA Term to Maturity 5 Years 5 Years
You have the following information on three bonds: Credit rating Bond A Bond B Bond C AAA AA Term to Maturity 5 Years 5 Years 5 Years Yield to maturity 6% 7% 8.5% . You believe that the correct spread between AAA and AA bonds should be 60 basis points and between AA and A bonds should be 70 basis points. The profit maximising strategy you should adopt is: Buy bond A, short sell Bond B and short sell Bond C. Short sell bond A, buy Bond B and short sell Bond C Buy bond A, short sell Bond B and buy Bond C Short sell bond A, buy Bond B and buy Bond C
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