If the Value of a Treasury Bond Was Lower Than

question 37

Multiple Choice

If the value of a Treasury bond was lower than the value of the sum of its parts (STRIPPED cash flows) ,

• A) arbitrage would probably occur.
• B) arbitrage would probably not occur.
• C) the FED would adjust interest rates.
• D) None of the options are correct.

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Definitions:

Financial Lease

A type of lease where the lessee assumes some of the risks and benefits of ownership of the leased asset.

Fully-Amortized

Describes a loan in which all payments will be made on time and in full over the life of the loan, resulting in the complete payoff of the loan amount and interest.

Insurance

A financial product that provides protection against potential future losses or damages.

Financial Leases

Financial leases are long-term leases in which the lessee is responsible for maintenance, taxes, and insurance, essentially treating the leased asset as if it were owned.