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Business, 26.06.2020 16:01 nakeytrag

he yield to maturity (YTM) on 1-year zero-coupon bonds is 6% and the YTM on 2-year zeros is 7%. The yield to maturity on 2-year-maturity coupon bonds with coupon rates of 9% (paid annually) is 6.5%. a. What arbitrage opportunity is available for an investment banking firm? The arbitrage strategy is to buy zeros with face values of $ 90 and $ 1090 , 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.)

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he yield to maturity (YTM) on 1-year zero-coupon bonds is 6% and the YTM on 2-year zeros is 7%. The...
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