A 20-year $100-par-value bond with a coupon rate of 10% is selling at par. The bond...
- A 20-year $100-par-value bond with a coupon rate of 10% is selling at par. The bond is deliverable for a futures contract that settles in three months. The annualized 3-month interest rate is 6%. At this rate funds can be borrowed to purchase the underlying bond in a cash-and-carry strategy. If the futures is priced at $101, is there any arbitrage opportunity and why?
- No, the futures is priced fairly.
- Yes, the futures is overpriced based on the cash-and-carry strategy. *
- Yes, the futures is underpriced based on the cash-and-carry strategy.
- Yes, for par bonds the futures and the underlying bond should always have the same price.
Homework Answers
C. Yes, the futures is underpriced. 
Bases on the image, it is seen that that price of the bond is underpriced.
Add Answer to:
A 20-year $100-par-value bond with a coupon rate of 10% is
selling at par. The bond...
Consider a two-year risk-free discount (zero coupon) bond with $1,000 par value. In other words, this...
Consider a two-year risk-free discount (zero coupon) bond with $1,000 par value. In other words, this is a security that promises a single risk-free payment of $1,000 in two years. a) If the risk-free rate is 4%, what we can conclude about the price of this bond in a normal market? Suppose that the price of the bond is $920. Is arbitrage possible? If yes, outline actions to be taken to perform an arbitrage strategy (be specific) and state arbitrage...
The YTM on a 6-month $20 par value zero-coupon bond is 18%, and the YTM on...
The YTM on a 6-month $20 par value zero-coupon bond is 18%, and the YTM on a 1-year $20 par value zero-coupon bond is 20%. These YTMs are semiannual BEYs. What would be the arbitrage-free price of a 1-year bond with coupon rate of 20% (semiannual payments) and par value of $1000? Assume that this bond is issued by the same company as the zero-coupon bonds.
Analyze the 20-year, 8% coupon rate (annual payment), $1,000 par value bond. The bond currently sells...
Analyze the 20-year, 8% coupon rate (annual payment), $1,000 par value bond. The bond currently sells for $1,318. What's the bond's yield to maturity? o o 5.36% 5.68% o 6.75% o 7.85% A 10-year corporate bond has an annual coupon payment of 8%. The bond is currently selling at par ($1.000). Which of the following statement is NOT correct? The bond's yield to maturity is 8%. The bond's current yield is 8%. If the bond's yield to maturity remains constant,...
Walmart has a 8.3% coupon 20 year bond (par value = 1,000). Assume that coupon payments...
Walmart has a 8.3% coupon 20 year bond (par value = 1,000). Assume that coupon payments are semi-annual and that the current price is $980.50. What is the yield-to-maturity of this bond? Be sure to report on an annualized basis and as a raw number - i.e. if your answer is 6.5%, input as 6.5.
A 20 year, 8% semi-annual coupon bond with a par value of $1,000 may be called...
A 20 year, 8% semi-annual coupon bond with a
par value of $1,000 may be called in 10
years at a call price of $1,100. The bond sells for
$1,200.
e. How would the price of
the bond be affected by a change in the going market interest
rates?
Please show work ( by adding numbers or CELL with
formula if needed). Thank you, will rate.
L M N I e a A 20 year, 8% semi-annual coupon bond with...
Question 15 5 pts Two years ago, Bob purchased a 20-year $1.000 par value zero-coupon bond...
Question 15 5 pts Two years ago, Bob purchased a 20-year $1.000 par value zero-coupon bond for $311.80. If today (with 18 years to maturity) the bond is priced to yield 4.90%, what is his annualized return if he sells the bond? Hint: Calculate the price of the bond today, and use as FV to calculate the return over 2 years. Your answer should be between 4.02 and 22.46, rounded to 2 decimal places, with no special characters.
Question 15 5 pts Two years ago, Bob purchased a 20-year $1,000 par value zero-coupon bond...
Question 15 5 pts Two years ago, Bob purchased a 20-year $1,000 par value zero-coupon bond for $311.80. If today (with 18 years to maturity) the bond is priced to yield 4.65%, what is his annualized return if he sells the bond? Hint: Calculate the price of the bond today, and use as FV to calculate the "return over 2 years. Your answer should be between 4.02 and 22.46, rounded to 2 decimal places, with no special characters.
Question 15 5 pt Two years ago, Bob purchased a 20-year $1,000 par value zero-coupon bond...
Question 15 5 pt Two years ago, Bob purchased a 20-year $1,000 par value zero-coupon bond for $311.80. If today (with 18 years to maturity) the bond is priced to yield 4.65%, what is his annualized return if he sells the bond? Hint: Calculate the price of the bond today, and use as FV to calculate the return over 2 years, Your answer should be between 402 and 22.46, rounded to 2 decimal places, with no special characters.
Joey is considering the purchase of a $1000 par value bond with a coupon rate of...
Joey is considering the purchase of a $1000 par value bond with a coupon rate of 5.1% (with interest paid semiannually) that matures in 12 years. If the bond is priced to yield 9%, what is the bond's current price? The bond's current price is =$
For bond selling for $640, with a par value of $1,000 and a coupon rate of...
For bond selling for $640, with a par value of $1,000 and a coupon rate of 17.03 percent, the current yield is
Consider a two-year risk-free discount (zero coupon) bond with $1,000 par value. In other words, this is a security that promises a single risk-free payment of $1,000 in two years. a) If the risk-free rate is 4%, what we can conclude about the price of this bond in a normal market? Suppose that the price of the bond is $920. Is arbitrage possible? If yes, outline actions to be taken to perform an arbitrage strategy (be specific) and state arbitrage...
Analyze the 20-year, 8% coupon rate (annual payment), $1,000 par value bond. The bond currently sells for $1,318. What's the bond's yield to maturity? o o 5.36% 5.68% o 6.75% o 7.85% A 10-year corporate bond has an annual coupon payment of 8%. The bond is currently selling at par ($1.000). Which of the following statement is NOT correct? The bond's yield to maturity is 8%. The bond's current yield is 8%. If the bond's yield to maturity remains constant,...
A 20 year, 8% semi-annual coupon bond with a
par value of $1,000 may be called in 10
years at a call price of $1,100. The bond sells for
$1,200.
e. How would the price of
the bond be affected by a change in the going market interest
rates?
Please show work ( by adding numbers or CELL with
formula if needed). Thank you, will rate.
L M N I e a A 20 year, 8% semi-annual coupon bond with...
Question 15 5 pts Two years ago, Bob purchased a 20-year $1.000 par value zero-coupon bond for $311.80. If today (with 18 years to maturity) the bond is priced to yield 4.90%, what is his annualized return if he sells the bond? Hint: Calculate the price of the bond today, and use as FV to calculate the return over 2 years. Your answer should be between 4.02 and 22.46, rounded to 2 decimal places, with no special characters.
Question 15 5 pts Two years ago, Bob purchased a 20-year $1,000 par value zero-coupon bond for $311.80. If today (with 18 years to maturity) the bond is priced to yield 4.65%, what is his annualized return if he sells the bond? Hint: Calculate the price of the bond today, and use as FV to calculate the "return over 2 years. Your answer should be between 4.02 and 22.46, rounded to 2 decimal places, with no special characters.
Question 15 5 pt Two years ago, Bob purchased a 20-year $1,000 par value zero-coupon bond for $311.80. If today (with 18 years to maturity) the bond is priced to yield 4.65%, what is his annualized return if he sells the bond? Hint: Calculate the price of the bond today, and use as FV to calculate the return over 2 years, Your answer should be between 402 and 22.46, rounded to 2 decimal places, with no special characters.
Most questions answered within 3 hours.
-
1. Which of the following is true about politics and health
organizations?
A. Health organizations are...
asked 15 minutes ago -
A space vehicle is coasting at a constant velocity of 18.1 m/s
in the +y direction...
asked 1 hour ago -
5) Use the following balanced equation to answer questions
(a)-(i).
3 Cu(s) + 8 HNO3(aq) →...
asked 57 minutes ago -
A three-year maturity bond with a 12% annual coupon rate is
currently traded at par $1000...
asked 1 hour ago -
1.
What is the minimum volume to use in the Spec 20 cuvette in order
to...
asked 1 hour ago -
A builder wants to install wall-to-wall carpeting in a living
room of length 8.87 m and...
asked 1 hour ago -
Organizational change can produce anxiety in those affected by
the change. In what ways can change...
asked 1 hour ago -
Ozone in the atmosphere may react with nitric oxide.
From the following data, calculate the DG...
asked 1 hour ago -
Steven Long, a bond analyst, is analyzing a convertible bond.
The characteristics of the bond are...
asked 1 hour ago -
Michael Bordellet is
the owner/pilot of Stellar Air Service. The company flies a daily
round trip...
asked 1 hour ago -
Hi, I need to change the conversion where stack is into a class
stack and add...
asked 2 hours ago -
Consider the log logistic CDF F(t)=1/(1+(t/α)-β)
Find f(t), S(t), h(t), and H(t).
It can be shown...
asked 2 hours ago