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What would be the maximum price would bid for per bond

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Reference no: EM132910371

Problem 1: The auctions for the next set of t-bills (zero coupon government bonds) are due in 10 days. The bond has a life of 180 days and face value of ? 100. One of your friends has also suggested an investment idea to you - loan me ? 1 and I will pay you back ? 1.4 in 18 months. On the day of t-bills bidding, what would be the maximum price you would bid for per bond that makes you indifferent between investing in the bonds and loaning money to your friend?

Reference no: EM132910371

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