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What are the cash flows of this investment strategy

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Problem: Bonds A, B and C are default-free bonds with face values of $100). Assume the coupon-paying bonds make annual payments. What is the arbitrage-free value of Bond C?

Bond A - Maturity 1 year - Coupon Rate - 0% Price - $97.20

Bond B - 2 years - Coupon Rate - 0% Price $92.10

Bond C - 2 years - Coupon Rate 8% Price = ?

Required:

Problem: Assume Bond C is currently trading at a price of $100. Assume that you buy 25 bonds C at this price, while selling two A bonds and 27 b bonds. What are the cash flows of this investment strategy at the initial investment date, at the end of the first year, and at the end of the second year?

Reference no: EM132432894

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