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Please only answer part e) and attach any Excel formulas used 9. (Coupon stripping, arbitrage) You are given the following information on three traded bonds
Please only answer part e) and attach any Excel formulas used
9. (Coupon stripping, arbitrage) You are given the following information on three traded bonds making annual coupon payments: CHAPTER 15 Bond Valuation 505 A B D E 1 Bond Coupon rate 0.00% 5.00% 10.00% 2 3 4 Face value $1,000 $1,000 $1,000 A B Maturity 1 2 2 Yield to maturity 5.00% 5.85% 6.00% c. a. What are the prices of the above three bonds? b. What is the zero-coupon bond yield for a 1-year bond? What is the zero-coupon bond yield for a 2-year bond based on the price of bond B? d. What is the zero-coupon bond yield for a 2-year bond based on the price of bond C? e. Challenge question: Create an arbitrage strategy from buying and/ or selling a combination of the three bondsStep by Step Solution
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