Business
Business, 05.06.2020 13:58, hezekiahmharris

Hedge Fund You are a bond analyst working for a hedge fund. A bond you follow has face value 100, has a coupon rate of 5% (paid once a year) and matures in 5 years. You are trying to find if there is any profitable trading strategy. You’ve done extensive research and have formed your opinions on future economic conditions. As a result, you expect that there will soon be a major shift in the yield curve. The current and the expected yield curve is shown below:
YearCurrentExpected
1 1% 3.00%
2 1.50% 2.50%
3 2.00% 3.50%
4 3.00% 4.00%
5 5.00% 5.00%

Question 1/3

Calculate the price of the bond based on the current yield curve? (use 2 decimal digits)
incorrect

Question 2/3

Calculate the price of the bond based on the expected yield curve $ __(keep two decimal points)

Question 3/3

You are 100% sure about your expectation of the movement of the yield curve in the near future. And you want to set up a trading position before the market price in the future shift of yield curve. What should you do?
Buy the bond
Sell the bond
Do nothing

answer
Answers: 3

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Hedge Fund You are a bond analyst working for a hedge fund. A bond you follow has face value 100, h...

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