(a) [25 marks] From the following data obtain the discount curve: A zero coupon bond paying P2(0,0.5) = 99.20. A coupon bond paying 3% quarterly P(0, 0.25) = 100.5485. A coupon bond paying 6% quarterly P(0,0.75) = 103.1655. A coupon bond paying 5% semiannually P(0,1) = 103.0325. (b) [25 marks] Calculate the yield to maturity on the 1-year bond from (a). (c) [25 marks] In addition to bonds in (a) you also find the following 1.5-year that pays coupons seminannually: A coupon bond paying 3% semiannually P(0,1.5) 103.0325. Is the price of this bond consistent with the no-arbitrage principle? Explain and give an example of an arbitrage strategy if the arbitrage opportunity exists. Assume that all zero-coupon bonds with all maturities can by sythesized. (d) [25 marks] What is the advantage of a factor model? = (a) [25 marks] From the following data obtain the discount curve: A zero coupon bond paying P2(0,0.5) = 99.20. A coupon bond paying 3% quarterly P(0, 0.25) = 100.5485. A coupon bond paying 6% quarterly P(0,0.75) = 103.1655. A coupon bond paying 5% semiannually P(0,1) = 103.0325. (b) [25 marks] Calculate the yield to maturity on the 1-year bond from (a). (c) [25 marks] In addition to bonds in (a) you also find the following 1.5-year that pays coupons seminannually: A coupon bond paying 3% semiannually P(0,1.5) 103.0325. Is the price of this bond consistent with the no-arbitrage principle? Explain and give an example of an arbitrage strategy if the arbitrage opportunity exists. Assume that all zero-coupon bonds with all maturities can by sythesized. (d) [25 marks] What is the advantage of a factor model? =