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    What Are Our Cash Flows?

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    kanye
    We borrow $90.9 today to buy a bond for $80.9, leaving $10 in cash. In one year the bond pays $100, which is exactly enough to repay the $90.9 loan, resulting in zero net cash flow. The initial $10 difference is an arbitrage profit from the transaction.

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    What Are Our Cash Flows?

    Uploaded by

    kanye
    9 views1 page
    We borrow $90.9 today to buy a bond for $80.9, leaving $10 in cash. In one year the bond pays $100, which is exactly enough to repay the $90.9 loan, resulting in zero net cash flow. The initial $10 difference is an arbitrage profit from the transaction.

    Original Description:

    Lecture 1(1).24

    Original Title

    Lecture 1(1).24

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    We borrow $90.9 today to buy a bond for $80.9, leaving $10 in cash. In one year the bond pays $100, which is exactly enough to repay the $90.9 loan, resulting in zero net cash flow. The initial $10 difference is an arbitrage profit from the transaction.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    9 views1 page

    What Are Our Cash Flows?

    Uploaded by

    kanye
    We borrow $90.9 today to buy a bond for $80.9, leaving $10 in cash. In one year the bond pays $100, which is exactly enough to repay the $90.9 loan, resulting in zero net cash flow. The initial $10 difference is an arbitrage profit from the transaction.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    of 1

    What are our cash flows?

    Today we borrow $90.9 and buy the bond for


    $80.9. We are left with $10.
    In one year the bond pays us $100 which is
    exactly enough to repay the loan. We have
    zero net cash flow.
    Our free $10 is an arbitrage profit and the
    entire scheme is an arbitrage trade

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