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  3. the yield to maturity (ytm) on 1-year zero-coupon

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

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Accounting

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The 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 13 % (paid annually) is 6.4 %. a. What arbitrage opportunity is available for an investment banking firm? The arbitrage strategy is to buy zeros with face values of $ and respective maturities of one year and two years. and $ b. What is the profit on the activity? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Profit each bond 9 of 9 Next

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