Treasury STRIP
Not what you're looking for?
On February 18, 2008, a two-year Treasury STRIP (default free, zero-coupon note) sold for $98.5678 per hundred dollar of par value, while a four-year Treasury STRIP sold for $97.1264 per hundred dollar of par value. Assuming financial markets are perfect, you want to own $22M face value of 2-year Treasury STRIPs in two years and only pay the same price as the February 18, 2008 price.
1. Without using any derivatives, design a strategy to achieve this goal.
2. Suppose that the 2-year forward price for a two-year STRIP was $97.2378 per hundred dollar of par on February 18. What should have been the price of a replicating portfolio of a long forward contract position?
Purchase this Solution
Solution Summary
This solution designs a strategy to achieve the wanted goal as well as determines the price of a replicating portfolio of a long forward contract position.
Purchase this Solution
Free BrainMass Quizzes
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Lean your Process
This quiz will help you understand the basic concepts of Lean.