What are the zero prices for the 6-month, the 1-year, the 18-month, and the 2-year Treasury securities above, respectively?  

2. What is the 1-year forward rate beginning 6 months from today?

 

3. Given the zero prices obtained in (1)  what should be the price of a 2-year T-note with 7.5% annual coupon (also paid semi-annually) with $1,000 par value per share?

4. Suppose the 2-year T-note with 7.5% annual coupon in (4) is currently traded at $1,010 per share for 10,000 shares in the market.  How can you construct a risk-free arbitrage deal using all five Treasury securities above to lock in a positive profit today and zero obligations in the future?  How much is the dollar profit in the deal?

Four Treasury securities data from today's Wall Street Journal are provided below: Treasury Security Bond A C T-bill T-bill T-note T-note Annual Coupon Maturity 6 months 0% 1 year 0% 18 months 3.875% 2 years 4.625% Par Value Price $984.0240 $1,000 $966.1280 $1,000 $999.0625 $1,000 $1,009.0625 $1,000 Please note that actual coupons are paid semi-annually, i.e., one half of the annual coupon.