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d. Consider the following STRIP Bonds, and calculate the YTM/Spot rates, assuming the settlement date is 12/10/2022 : e. An insurance company projects claims of
d. Consider the following STRIP Bonds, and calculate the YTM/Spot rates, assuming the settlement date is 12/10/2022 : e. An insurance company projects claims of $250m,$300m, and $500m,3,4, and 5 years later. If the company wants to match the projected liabilities with STRIPs, how much would the strategy cost today? Will the strategy protect the company from cash-flow risk? f. Using the above spot rates, what is the price of a 5-year, 4.5% bond? Assume semiannual interest payments. What is the YTM of the 5-year T-bond? g. If the 5-year T-bond is selling for 110 , is there an arbitrage opportunity? h. How much is the arbitrage profit? What are the required trades to exploit the arbitrage opportunity
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