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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Financial Markets And Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
9th Edition
0134519264, 9780134519265
