Subjects: Finance 経済

This is a group project assignment in my Masters course for fixed income in which we attained pretty good marks: 28/30. Putting it up here for reference. The topic is as follows:

On 1 January 2005, you are considering two investment opportunities. A six month risk-free bond with 4% p.a. coupon is priced at 98.45. It has a $1,000 par value and will mature on 30 June. Alternatively, you could invest in a one-day risk-free short-term note for which the return for the six-month period (1 January 2005 to 30 June 2005) is currently unknown. You are provided with the historical yields of the note. Using only the information provided, would you purchase the bond or the note? Write a report giving your recommendation.