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Explanation:
The financing value of the bond can be determined by finding its value for the period that it trades at the special spread.
Number of days it is traded at the special spread = 122 days
Financing value = $1,000 \times \frac{122}{360} \times 0.50% = ` per $1,000
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Q.4121 Calculate the financing value per $1,000 market value of an on-the-run bond if it was issued on July 1<sup>st</sup> 2019 and trades at a special spread of 0.50%. The bond is expected to trade at GC rates after October 31<sup>st</sup> 2019. Use the actual/360 day convention.
A
$1.57
B
$1.60
C
$1.67
D
$1.69