15.9 The yield to maturity (YTM) on 1-year zero-coupon bonds is 6% and the YTM on 2-year zeros is 7%. The yield to maturity on 2-year-maturity coupon bonds with coupon rates of 13% (paid annually) is 6.4%.

a. What arbitrage opportunity is available for an investment banking firm?

The arbitrage strategy is to buy zeros with face values of $ and $ , and respective maturities of one year and two years.

b. What is the profit on the activity? profit ___ each bond.(Do not round intermediate calculations. Round your answer to 2 decimal places.)

The yield to maturity (YTM) on 1-year zero-coupon bonds is 6% and the YTM on 2-year zeros is 7%. The yield to maturity on 2-year- maturity coupon bonds with coupon rates of 13% (paid annually) is 6.4 %. a. What arbitrage opportunity is available for an investment banking firm? The arbitrage strategy is to buy zeros with face values of $ and $ and respective maturities of one year and two years. b. What is the profit on the activity? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Profit each bond