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Business, 26.02.2020 04:15 Billie9166

You wish to create a synthetic forward rate agreement in which you would lock in a return between 150 and 310 days. the price of a 150-day zero coupon bond is 0.9823 and the price of 310 day zero coupon bond is 0.9634. Which one of the following methods is the correct method to create the synthetic FRA? explain

A) borrow one 150-day bond and invest in 1.02 of the 310-day bonds.
B) borrow two 150-day bonds and invest in 0.98 of the 310-days bonds.
C) lend one of the 150-day bonds and borrow 1.02 of the 310-day bonds
D) lend two of the 150-day bonds and borrow 0.98 of the 310-day bonds.

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