A 7% annual coupon bond (face value $1,000), with three years left till maturity is selling
Question # 00024450
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Updated on: 08/29/2014 12:58 AM Due on: 08/29/2014
A 7% annual coupon bond (face value $1,000), with three years left till maturity is selling for $986.90.
Zero - coupon bonds of 1, 2, 3 years maturity (all with face value of $1,000) sell for $950, $900, $820,
respectively. Is this coupon bond properly priced? If not, show an arbitrage transaction to profit $2000
(today) from the mispricing.
Zero - coupon bonds of 1, 2, 3 years maturity (all with face value of $1,000) sell for $950, $900, $820,
respectively. Is this coupon bond properly priced? If not, show an arbitrage transaction to profit $2000
(today) from the mispricing.
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Solution: A 7% annual coupon bond (face value $1,000), with three years left till maturity is selling