1. 10 points. Consider the following fixed income securities. CF1, CF2, CF3, CF4 refer to cash-flows in years one, two, three, and four. Asset Price CF CF2 CF3 CF4 YTM 1 99.010 100 0 0 0 2 96.117 0 100 0 0 2% 3 94.232 0 0 100 0 4 88.849 0 0 0 100 5 1051.568 0 0 100 1100 3.430% (a) 3 points. Please calculate the YTMs to complete the above table. (b) 7 points. Does an arbitrage opportunity exist? If so, please describe the strategy by stating which asset(s) you would buy, and which asset(s) you would sell in order to earn a riskless profit. Please make sure you indicate the relative amount of the assets in the arbitrage portfolio. 1. 10 points. Consider the following fixed income securities. CF1, CF2, CF3, CF4 refer to cash-flows in years one, two, three, and four. Asset Price CF CF2 CF3 CF4 YTM 1 99.010 100 0 0 0 2 96.117 0 100 0 0 2% 3 94.232 0 0 100 0 4 88.849 0 0 0 100 5 1051.568 0 0 100 1100 3.430% (a) 3 points. Please calculate the YTMs to complete the above table. (b) 7 points. Does an arbitrage opportunity exist? If so, please describe the strategy by stating which asset(s) you would buy, and which asset(s) you would sell in order to earn a riskless profit. Please make sure you indicate the relative amount of the assets in the arbitrage portfolio