Free money
Quantitative Finance
Level
2
Your broker in the US calls you up and offers you a $1000 bond that pays a 5% coupon and expires tomorrow for $1030. Is this a great buy?
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No, the trade takes 2 days to settle, which is why you will not receive the coupon
Yes, you will receive $1050 when it expires tomorrow
Yes, the bond is worth $1050 since it has a 5% coupon
No, the bond is worth $1000 when you buy it
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