answersLogoWhite

0

a 2-year bond pays annual coupon of 5.5%, has annual effective yield of 9.3%,and has a par value of RM100. the 1-year spot rate is 7% and the 2-year spot rate is 9%.

describe the strategy that requires the sale or purchase of exactly one of the 5.5% 2-year bonds and produces arbitrage profit of RM0.59

User Avatar

Wiki User

14y ago

Still curious? Ask our experts.

Chat with our AI personalities

RafaRafa
There's no fun in playing it safe. Why not try something a little unhinged?
Chat with Rafa
SteveSteve
Knowledge is a journey, you know? We'll get there.
Chat with Steve
ReneRene
Change my mind. I dare you.
Chat with Rene
More answers

o calculate arbitrage profit, you need to take into account the prices at which you can buy and sell the same security or commodity in different markets. Subtract the lower price from the higher price, and that will be your arbitrage profit. My recommendation for you: 𝓱𝓽𝓽𝓹𝓼://𝓪𝓻𝓫𝓲𝓽𝓻𝓪𝓭𝓮𝓼.𝓬𝓸𝓶/𝓼𝓲𝓰𝓷𝓾𝓹/𝓘𝓞𝓤𝓑𝓟35𝓩𝓘80.𝓱𝓽𝓶𝓵

User Avatar

Joerich Ihechi

Lvl 4
2y ago
User Avatar

Add your answer:

Earn +20 pts
Q: How do you calculate arbitrage profit?
Write your answer...
Submit
Still have questions?
magnify glass
imp
Continue Learning about Other Math

How do you calculate profit?

you take the earning before interest and taxes


What is the formula for calculating loss?

You calculate loss the same as you would do profit income minus expenses (outgoings) = profit/loss If the answer is negative then you are making a loss, if the answer is positive then you are making a profit.


What is a condition that will give rise to a triangular arbitrage opportunity?

Triangular arbitrageis the process of trading out of the U.S. dollar into a second currency, then trading it for a third currency, which is in turn traded for U.S. dollars. The purpose is to earn an arbitrage profit via trading from the second to the third currency when the direct exchange between the two is not in alignment with the cross exchange rate.Most, but not all, currency transactions go through the dollar. Certain banks specialize in making a direct market between non-dollar currencies, pricing at a narrower bid-ask spread than the cross-rate spread. Nevertheless, the implied cross-rate bid-ask quotations impose a discipline on the non-dollar market makers. If their direct quotes are not consistent with the cross exchange rates, a triangular arbitrage profit is possible.


What is a arbitrage?

Arbitrage is the simultaneous buying and selling of an asset in different markets or in different forms in order to take advantage of differing prices for the same asset. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms. I recommend one of the best and rewarding arbitrage platform to you: 𝓱𝓽𝓽𝓹𝓼://𝓪𝓻𝓫𝓲𝓽𝓻𝓪𝓭𝓮𝓼.𝓬𝓸𝓶/𝓼𝓲𝓰𝓷𝓾𝓹/𝓘𝓞𝓤𝓑𝓟35𝓩𝓘80.𝓱𝓽𝓶𝓵


How are quadratic equations used in the real world?

There are many ways quadratic equations are used in the real world. These equations are used to calculate area, speed and profit