Question
Suppose that a zero-coupon bond that matures in 1 year costs $97 and that a zero-coupon bond that matures in 2 years costs $94. a)
Suppose that a zero-coupon bond that matures in 1 year costs $97 and that a zero-coupon bond that matures in 2 years costs $94.
a) What must be the price of a 2-year coupon bond with a 5% coupon rate? (All face values are $100)
b)How could you make an arbitrage profit if the coupon bond were trading at $100?
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International Economics
Authors: Robert C. Feenstra, Alan M. Taylor
3rd edition
978-1429278515, 142927851X, 978-1319029517, 1319029515, 978-1429278447
