You are given the following data concerning the following 5 years to maturity corporate bonds....
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Accounting
You are given the following data concerning the following 5 years to maturity corporate bonds. Company Bond IBM ACME Rating AAA BBB Yield to Maturity 8% 10% According to your analysis, the normal yield spread between AAA and BBB bonds should be 150 basis points. You decide to adopt a strategy to maximise profits from a return to the normal spread. The strategy to do this is: Buy IBM bonds. Buy ACME bonds. Short sell IBM bonds and use the proceeds to buy ACME bonds. Short sell ACME bonds and use the proceeds to buy IBM bonds
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