If the Value of a Treasury Bond Was Higher Than

question 35

Multiple Choice

If the value of a Treasury bond was higher than the value of the sum of its parts (STRIPPED cash flows) you could

• A)profit by buying the stripped cash flows and reconstituting the bond.
• B)not profit by buying the stripped cash flows and reconstituting the bond.
• C)profit by buying the bond and creating STRIPS.
• D)B and C
• E)none of the above

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Definitions:

Unauthorized Contract

An agreement made by a person who does not have the legal authority to do so on behalf of a party.

Ratifies

The act of formally approving or confirming a decision or agreement, making it officially valid.

Valid

Legally sound, effective, and binding.

Contract for Sale

A legally binding agreement where one party agrees to sell and another agrees to buy goods or property under specified terms and conditions.