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ouy and sell?d, 2 nCed, underpriced, overpriced? Can the dealer earn undepncecl. Deale and sett in fuluw 00KD Should buy bon to eam pvoft CIO 10 19.33 2 6. Fixed Income is to find mispricing of coupon bonds through the system of linear equations where # of knowns. Suppose there are only three treasury coupon bonds on the market today Bond A: 2-year 3% treasury coupon bond, trading today at price $1,007.9 Bond B: 2-year 4% treasury coupon bond, trading today at price $1,027.2 Bond C: 2-year 5% treasury coupon bond, trading today at price$1,0508 Let Po1 and Po,2 be the two unknowns, where Po.1 denotes the price today of a 1-year STRIPS, and Paz the price today of a 2-year STRIPS. Face value of STRIPS is $1. 1) Since each coupon bond is essentially a portfolio of STRIPS, write the 3-equation 2-unknown system. 2) Usually how many pairs of solutions to the 2 unknowns can you solve for this 3) Focusing on ON LY Bond A and Bond B, will this 2-equation 2-unknown system have solutions? Solve them if yes. et the values you solve for Po.1 and Po2. Suppose they are indeed the correct 4) Interpr can you say about arbitrage ge profit in any of three coupon bonds, in which onelsi, how much? a ny of three coupon bo