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There are five treasury bonds with a maturity of five years in the market with the following annual payments and prices: Year YTM Bond 1
There are five treasury bonds with a maturity of five years in the market with the following annual payments and prices: Year YTM Bond 1 Bond 2 Bond 3 Bond 4 Bond 5 1 3.093 100 200 50 100 100 2 4.257 100 200 50 100 100 3 4.752 100 200 50 100 100 4 5.737 100 200 50 100 100 5 7.394 1100 1200 1050 2100 1600 Price 1126 1515 913 1826 1476 Using STRIPS with face value of 50, can you generate arbitrage given the prices of the bond in the market? If so, describe your trading strategy
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