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The market gives the following prices for the three STRIPS with par value of $ 1 0 0 : Use the above information to answer
The market gives the following prices for the three STRIPS with par value of $ :
Use the above information to answer questions
Question A What are the spot interest rates for maturities of year and respectively?
Question B You have an asset paying and million dollars in year and respectively. What is the present value of this asset?
Question C A dealer is offering to sell you year STRIPS with a par value of $ million at $ million. Does this present an arbitrage opportunity?
a Yes
b No
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