Question
The yield to maturity (YTM) on 1-year zero-coupon bonds is 5% and the YTM on 2-year zeros is 6%. The yield to maturity on 2-year-maturity
The yield to maturity (YTM) on 1-year zero-coupon bonds is 5% and the YTM on 2-year zeros is 6%. The yield to maturity on 2-year-maturity coupon bonds with coupon rates of 12% (paid annually) is 5.8%.
a. What arbitrage opportunity is available for an investment banking firm?
The arbitrage strategy is to buy zeros with face values of $____ and $____ , and respective maturities of one year and two years.
b. What is the profit on the activity? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
| Profit | Each Bond |
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Forex Analysis And Strategies For Day Traders Profitable Investing With Currency Swaps Hedges And Scalps For Both Beginning And Advanced Traders
Authors: Steve Alkandros
1st Edition
1545117039, 978-1545117033
