Suppose a Two-Year Treasury Note Is Trading at Its Par

question 4

Multiple Choice

Suppose a two-year Treasury note is trading at its par value of $1,000.You examine the cash flows and discover that if you sell them individually in the market,you get $46.23 for the six-month coupon,$44.67 for the one-year coupon,$42.21 for the eighteen-month coupon,$40.22 for the two-year coupon,and $831.56 for the principal.The amount of arbitrage profit you can make by trading each security is:

• A) $2.58
• B) $4.89
• C) $10.34
• D) $41.78
• E) None of these answers are correct.

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Definitions:

Customer Sales Planning

The process of strategizing sales efforts tailored specifically towards meeting the needs and expectations of customers to boost sales results.

Undifferentiated Selling

A marketing strategy in which a company markets its products or services to a broad audience without any customization or segmentation.

Stimulus-response Presentation

A sales technique based on the psychological principle that a specific stimulus will elicit a predictable response, used to guide potential customers towards a desired action.

Pre-call Preparation

The process of gathering relevant information and planning strategies before making a sales call or meeting a client.