Suppose that you want to short BUG's outstanding ten-year,5 percent coupon bond,but you cannot find anyone willing to lend you the bond (to short) .Given that US Treasuries and CDS trade,you can create a short position in BUG's bond by:
A) going long a ten-year CDS on BUG
B) going short a ten-year CDS on BUG
C) going long a ten-year CDS on BUG and buying a ten-year US Treasury bond
D) going long a ten-year CDS on BUG and shorting a ten-year US Treasury bond
E) going short a ten-year CDS on BUG and shorting a ten-year US Treasury bond
Correct Answer:
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