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.
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A 20-year $100-par-value bond with a coupon rate of 10% is
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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.
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par value of $1,000 may be called in 10
years at a call price of $1,100. The bond sells for
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e. How would the price of
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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...
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