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There is a 4-year maturity bond, with a par value of 1.000 in XYZ and that has a 6,5% coupon. If a broker quoted the
There is a 4-year maturity bond, with a par value of 1.000 in XYZ and that has a 6,5% coupon. If a broker quoted the bond at 96,5 (so 965), please calculate the possible arbitrage using Zero Coupon bonds. YIELD CURVE FOR XYZ COUNTRY ZERO COUPON BONDS Time to YTM YTM Maturity 1 year 2 year 3 year 4 year 5 year 5.96% 6.20% 6.80% 7.40% 8.16% Long the zero coupon bond portfolio and short the coupon bond making a profit of 7.95 Long the zero-coupon bond portfolio and short the coupon bond making a profit of 24.79 Short the zero-coupon bond portfolio and long the coupon bond making a profit of 7.95 Short the zero-coupon bond portfolio and long the coupon bond making a profit of 24.79
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