Consider two five year bonds. One has a coupon 9% and sells for P1=101.00 , par value = 100.00. Ther other has a 7% coupon and sells for P2=93.2. Construct a long-short portfolio ?=[w1w2]T of these bonds , such that ?T=1 I am unsure how to construct the cashflows to mimic zero coupon bond. I have tried the following portfolio 0 1 2 3 4 5 sell 101 -7 -7 -7 -7 0 buy -93.2 7 7 7 7 107 7.8 0 0 0 0 107 is this going int he correct direction? If so how am I suppose to calculate the weights 1 and 2 ; is it w1= 101/(101-93.2) or 101/(101+93.2) I am also asked to find the value of the artificial five year zero coupon bond ; find the current price of the five year zero coupon bond ; find the five year spot rate of the five year zero coupon bond. If anyone could point me in the rght direction I would greatly appreciate it