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the payments of the bond are in columns year 1-5 6. There are five treasury bonds with a maturity of five years in the market
the payments of the bond are in columns year 1-5
6. There are five treasury bonds with a maturity of five years in the market with the following annual payments and prices: Year 1 2 3 4 5 YTM 3.093 (%) 4.257 (%) 4.752 (%) 5.737 (%) 7.934 (%) 2 4 Year Bond 1 Bond 2 Bond 3 Bond 4 Bond 4 1 100 200 50 100 100 200 50 100 3 100 200 50 100 200 50 100 100 5 1100 1200 1050 2100 1600 Price 1126 1515 913 1826 1476 100 100 100 100 a. Find a bond that is mispriced. b. Using STRIPS with face value of 50, describe an arbitrage strategy for the mispriced bond Step by Step Solution
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