Question
You observe following information of bonds A, B, and C.Assume semi-annual coupon payment and semi-annual compounding. Bond Maturity Par Value Annual Coupon Rate Price A
You observe following information of bonds A, B, and C.Assume semi-annual coupon payment and semi-annual compounding.
| Bond | Maturity | Par Value | Annual Coupon Rate | Price |
|---|---|---|---|---|
| A | 6 month | $1000 | 0% | $950 |
| B | 12 month | $1000 | 4% | $940 |
| C | 18 month | $1000 | 4% | $930 |
Construct the spot rate curve z1, z2, and z3.
Bond D is a 12-month coupon bond. The par is $1000, the coupon rate is 6%, and the price is $990. Is there an arbitrage opportunity? If yes, please show your trading strategy.
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How To Get Money For College Financing Your Future Beyond Federal Aid
Authors: Mark D. Snider
1st Edition
0768928869, 978-0768928860
