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Suppose a one-year pure discount bond (zero-coupon bond) is trading at 950, and a two-year pure discount bond is trading at 905. Assuming no market

Suppose a one-year pure discount bond (zero-coupon bond) is trading at 950, and a two-year pure discount bond is trading at 905. Assuming no market frictions, if a twoyear coupon bond with 5-percent coupon rate is trading at 992, describe explicitly how investors should trade to enjoy arbitrage profits. All bonds are riskless and have a face value of 1000

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