1. Below is the list of all bonds for a specific entity currently trading in the market. All bonds are annual coupon bonds and default free. Identify the undervalued/overvalued bond.

B. Identify the arbitrate trade. State specifically what financial transactions you would make in order to realize a profit. Assume that you cannot buy/sell fractional amounts of bonds.

Price Price Maturity Coupon Yield to (years) rate % maturity % 1 0% 4% Maturity (years) 1 961.54 1000.00 Coupon Yield to rate % maturity % 4% ??? 7% ??? 8% ??? 890.00 2 0% 6% 979.01 3 793.83 3 0% 8% 1000.00 3 3 ??? 4 0% 1031.92 3 9% ??? 7% Price Price Maturity Coupon Yield to (years) rate % maturity % 1 0% 4% Maturity (years) 1 961.54 1000.00 Coupon Yield to rate % maturity % 4% ??? 7% ??? 8% ??? 890.00 2 0% 6% 979.01 3 793.83 3 0% 8% 1000.00 3 3 ??? 4 0% 1031.92 3 9% ??? 7%