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

Solve 3 + 2 ln ( x /7+3 ) = -4 logarithm, Solve 3 + 2 ln ( x /7+3 ) = -4 . ...

Solve 3 + 2 ln ( x /7+3 ) = -4 . Solution This initial step in this problem is to get the logarithm by itself on one side of the equation  along with a coefficient of 1.

Determine the measure of angle, Using the expample provided below, if m∠ABE...

Using the expample provided below, if m∠ABE = 4x + 5 and m∠CBD = 7x - 10, Determine the measure of ∠ABE. a. 155° b. 73° c. 107° d. 25° d. ∠CBD and ∠ABE are vert

Seriation to developing pre-number concepts, Seriation :  You have read ab...

Seriation :  You have read about a preschooler's ability to order. Ordering a set of objects means to arrange them in a sequence according to some rule. This arrangement could be

Matrices, what is the business application of matrices

what is the business application of matrices

Example of integrals involving quadratics, Evaluate the following integral....

Evaluate the following integral. ∫√(x 2 +4x+5) dx Solution: Remind from the Trig Substitution section that to do a trig substitution here we first required to complete t

Analalitic geometry, 1. Write down the canonical equations of the line pass...

1. Write down the canonical equations of the line passing through the point A(2,3, 4) and being parallel to the vector q ={5,0,-1}.

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