Suppose you observe that a three-year, default-free security with an annual coupon rate of 10% and a face value of S1000 has a price today of S1183.50. Is there an arbitrage opportunity? If so, show specifically how you would take advantage of this opportunity. If not, why not? A company issue three default free zero coupon bonds with of $1000 with three different years o maturity Year of maturity Price of bonds $970.87 $938.95 $904.56 Price of coupon bond is lower than price of zero coupon bonds. Price of coupon bond is $1183.50 where as price of zero coupon bonds is $ 1186.0. So the arbitrage is possible anc investor can take advantage of it. In the solution, it suggests to buy 10 bonds,_but why the become 13bonds(1+1+11)? I don't understand the solution in red boxes First day 1 year 2 year 3 year Buy 10 coupon bonds $11835.0 $1,000 $1,000 $11,000 Short sell 1, one year zero coupon bond S970.87(-$1000) Short sell 1, two year zero coupon bonds $938.95 (-$1,000) Short sell 11, three year zero coupon bonds $9950.16 (-$11.000) Total cash flow $24.98