Calculate the profit the bank earn each treasury bond, Mathematics

Assignment Help:

Financial institutions often create synthetic instruments out of existing instruments.  In this case an investment bank plans to buy Treasury Bonds with 20-year maturities at their current market price of $1,000 per bond.  Then the bank will create two instruments. One instrument (like a zero coupon bond) will promise only one maturity payment of $1,000 in 20 years.  The other instrument will pay only interest at the annual coupon interest rate of the bond, which is 6%.  Both of these synthetic instruments can be sold to investors at prices that imply a yield to maturity of 5% per year.  If the bank buys the Treasury bond and converts it into these two synthetic securities and then sells them, how much profit will the bank earn per each Treasury bond? 

            ANSWER:  Profit ____________________

 


Related Discussions:- Calculate the profit the bank earn each treasury bond

Variation and proportion, i am not getting what miss has taught us please w...

i am not getting what miss has taught us please will you will help me in my studies

Determine the volume of the hollow solid, A solid is formed by cutting the ...

A solid is formed by cutting the top off of a cone with a slice parallel to the base, and then cutting a cylindrical hole into the resulting solid. Determine the volume of the holl

Graphs, How do I graph a round robin pool tournment with 6 players using gr...

How do I graph a round robin pool tournment with 6 players using graph theory

Generalized least squares regression, a. Estimate the following model,  C t...

a. Estimate the following model,  C t   =  β 0   +  β 1 * DI t +  ε t             Where C t = Aggregate Consumption Expenditure in Australia, quarterly data for the per

Real exponents, It is a fairly short section.  It's real purpose is to ackn...

It is a fairly short section.  It's real purpose is to acknowledge that the exponent properties work for any exponent.  We've already used them on integer and rational exponents al

How to dividing rational expressions, How to Dividing Rational Expressions ...

How to Dividing Rational Expressions ? To divide two fractions, or rational expressions, keep in Mind that division is the same as multiply by the Reciprocal of the second fra

What decimal is represented by point a on the number line, What decimal is ...

What decimal is represented by point A on the number line? The hash marks indicate units of 0.01 between 0.75 and 0.80. Point A is 0.77. See the ?gure below.

Explain pie charts, Explain Pie Charts ? If the frequencies are writte...

Explain Pie Charts ? If the frequencies are written as percentages, they can be easily compared using a pie chart. The following is an example of a pie chart using the data fr

Npv, how to calculate the npv

how to calculate the npv

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd