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 What arbitrage opportunity is available for an investment banking firm What is the profit on the activit...

The price of the coupon bond based on its yield to mat ...

The yield to maturity (YTM) on 1-year zero-coupon bonds is 5% and the YTM on 2-year zeros

Question:

The yield to (YTM) on 1-year zero-coupon bonds is 5% and the YTM on 2-year zeros is 6%. The yield to on 2-year-maturity bonds with rates of 12% (paid annually) is 5.8%. What arbitrage opportunity is available for an investment banking firm? What is the profit on the activity?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...