Question 1 Consider the following bond quotations taken on June 3, 2021: maturity 5/15/2041 Coupon 2.250% Bid Price Asked Price Yield to maturity Duration 100.242 100.262 5/15/2041 4.375% 142.166 142.186 a. What is your intuition on the different coupon rates on the two bonds, despite their same maturities? b. What are the Yields to maturities (using the asked price) and Duration of the bonds? c. What are the Val01 of the bonds? d. Is there an arbitrage opportunity? e. What is the required transaction to exploit the arbitrage opportunity? Specify the details of the transaction. f. How much would you make on $10m face value on these bonds, assuming each YTM changes by half of the current spread? g. Briefly state what are the risks involved in the strategy? Risk-free rate Rf For Risk-free rate Rf for this question, use the Yield (using the asked price) of the following 10- year bond (price as of June 3, 2021, this is the settlement date): maturity 5/15/2031 Coupon 1.625% Bid Price 100.092 Asked Price Yield to Maturity 100.102 1.614