The following are the yields to maturity of zero-coupon bonds. 1-year YTM = 2.50% 2-year YTM = 3.00% A 2-year bond with

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answerhappygod
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The following are the yields to maturity of zero-coupon bonds. 1-year YTM = 2.50% 2-year YTM = 3.00% A 2-year bond with

Post by answerhappygod »

The following are the yields to maturity of zero-coupon
bonds.
1-year YTM = 2.50%
2-year YTM = 3.00%
A 2-year bond with annual coupons, with coupon rate 5% and face
value $1,000 is quoted in the market at par, that is, the quoted
price is $1,000.
What is the profit you can achieve with a long-short arbitrage
strategy? (You can only buy/sell one bond of each).
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