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A perpetuity bond is a coupon bond with infinite maturity. The price-yield relation for the perpetuity bond is P = C/y where P is the

A perpetuity bond is a coupon bond with infinite maturity. The price-yield relation for the perpetuity bond is P = C/y where P is the price, C the coupon rate and y the yield. Consider two perpetuity bonds, a 4s and a 3s. If the 4s is yielding 5%, what should the yield for the 3s be to exclude arbitrage opportunities?

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