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Consider a 6% T-note with 1.5 years to maturity. Spot rates (expressed as semiannual yields to maturity) are: 6 months = 5%, 1 year =

Consider a 6% T-note with 1.5 years to maturity. Spot rates (expressed as semiannual yields to maturity) are: 6 months = 5%, 1 year = 6% and 1.5 years = 7%. If the note is selling for $992, compute the arbitrage profit and explain how a dealer would perform the arbitrage. Par value= 1,000

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