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1. Consider the following Treasury securities. CF1, CF2, CF3 refer to cash-flows in years one, two, and three. Asset 2 Price 98.765 97.547 96.350 2134.148

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1. Consider the following Treasury securities. CF1, CF2, CF3 refer to cash-flows in years one, two, and three. Asset 2 Price 98.765 97.547 96.350 2134.148 CF CF2 CF3 100 100 100 400 400 1400 4 (a) What is the term structure of interest rates in the marketplace? Please use annual compounding. (b) Does an arbitrage opportunity exist? If so, please describe the strategy. If not, explain why there is no riskless profit opportunity

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