Prices of zero-coupon, default-free securities with face values of $1000 are summarized in the following table: Suppose

Question:

Prices of zero-coupon, default-free securities with face values of $1000 are summarized in the following table:

Suppose you observe that a three-year, default-free security with an annual coupon rate of 10% and a face value of $1000 has a price today of $1183.50. Is there an arbitrage opportunity? If so, show specifically how you would take advantage of this opportunity. If not, whynot?

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...