Calculate the profit the bank earn each treasury bond, Mathematics

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 ____________________

 

Posted Date: 2/28/2013 4:36:37 AM | Location : United States







Related Discussions:- Calculate the profit the bank earn each treasury bond, Assignment Help, Ask Question on Calculate the profit the bank earn each treasury bond, Get Answer, Expert's Help, Calculate the profit the bank earn each treasury bond Discussions

Write discussion on Calculate the profit the bank earn each treasury bond
Your posts are moderated
Related Questions
Union of Sets Venn diagram presenting the union of sets A and B or A?B = Shaded area is demonstrated below: A ?B = Shaded area

Plot the points A(2,0) and B (6,0) on a graph paper. Complete an equilateral triangle ABC such that the ordinate of C be a positive real number .Find the coordinates of C   (Ans: (

There are a variety of strategies that people use for developing this ability. For instance, while adding 1821,695 and 250, a person could estimate it mentally i) by rounding of

Question 1. Use cylindrical coordinates to nd the mass of the solid of density e z which lies in the closed region  Question 2. The density of a hemisphere of radius a (y 

Bill spent 50% of his savings on school supplies, and then he spent 50% of what was left on lunch. If he had $6 left after lunch, how much did he have in savings at the starting?

E 1) Try the two activities detailed above with a few children around you Evaluate whether they really helped to improve the children's performance of mental arithmetic. Anot

Explain sparse matrix and Dense matrix?

If the area of a small size pizza is 78.5 in 2 , what size pizza box would required for the small pizza? (Note: Pizza boxes are calculated according to the length of one side.)

Ribbon is wrapped around a rectangular box that is 10 by 8 by 4 in. Using the example provided, calculate how much ribbon is needed to wrap the box. consider the amount of ribbon d

5645.356 turn into fraction