52. (LO 6.2, 6.3, 6.5) The Slice & Dice Investment Co. needs some help understanding the intricacies of bond pricing. It has observed the following prices for zero coupon bonds that have no risk of default: Maturity Price per $1 Face Value 1 year 2 years 3 years $0.97 0.90 0.81 a. How much should Slice & Dice be willing to pay for a three-year bond that pays a 6-percent coupon, assuming annual coupon payments start one year from now? b. What is the yield to maturity of the three-year coupon bond? c. Suppose Slice & Dice purchases this coupon bond and then "un-bundles" it into its four component cash flows: three coupon payments and the par value amount. At what price(s) can Slice & Dice resell each of the first three cash flows (the coupon payments) today? d. The remaining cash flow (the face value amount) is a "synthetic" three-year, zero coupon bond. How much must this "strip bond" be sold for if Slice & Dice is to break even on the investment? e. What is the yield to maturity on the synthetic three-year, zero coupon bond? f. Why are the answers for parts b and e different? 53. (LO 6.6) Bower is a Canadian investor. He noticed that the euro spot rate is currently quoted at C$1.4768 per euro. The European interest rate is 6 percent on one-year T-bills, and the one-year interest rate in Canada is 3 percent. The one- year forward rate is C$1.409/euro. Determine whether there is an arbitrage opportunity. State the transactions Bower should apply to profit from the arbitrage opportunity if one exists. Explain what would happen if many other investors also seized such an arbitrage opportunity, if one existed. 54. (LO 6.7) A bond that matures in 10 years is callable in three years at a call price of $1,025. The bond has a semi-annual coupon rate of 8 percent. If the YTM is 7.3 percent and the YTC is 6.92 percent, what is the bond's current price? Is this bond likely to be called? 55. (LO 6.7) A 12-year, 7.5-percent bond is callable in four years at a call price of $1,045. If the bond pays semi-annual coupons and is selling for $1,038, what is the YTM and YTC of the bond? Is this bond likely to be called