MGMT 490d - You look up a 15-month bond forward contract
Offered Price: $ 4.00 Posted By: Posted on: 02/09/2017 10:53 PM Due on: 02/10/2017
You look up a 15-month bond forward contract and find the following: the current price of the bond is $1200, and the forward price is $1300. It will pay a coupon of $50 in 4 months and 10 months. The annualized, continuously compounded risk free rate is 0.5% for 4 months, 1% for 10 months, and 2% for 15 months. Find an arbitrage trade, and show the profit from your trade.