Assume there are four default-free bonds with the following prices and future cash flows: Cash Flows Bond
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Assume there are four default-free bonds with the following prices and future cash flows:
Cash Flows Bond Price Today Year 1 Year 2 Year 3 A $934.15 1000 0 0 B 879.84 0 1000 0 C 1130.84 100 100 1100 D 830.72 0 0 1000 Do these bonds present an arbitrage opportunity? If so, how would you take advantage of this opportunity? If not, why not?
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