Question: (a.) Carefully explain to your dad whether an arbitrage prot is possible and why. You have the following information. _ t - A 2-Year, 2.5%

(a.) Carefully explain to your dad whether an arbitrage prot is possible and why. You have the following information. _ t - A 2-Year, 2.5% coupon paying bond with a face value of 1,000. The yield to maturity is 2.2% and coupon payments are made semi-annually. - Zero coupon paying bond prices. Coupon Paying Bond smonth ., 12 month " _ 18 month 0.9677 24 months 0.9553 Carefully explain what you would do regarding buying/selling those different xed income securities so that you can realise an arbitrage profit. [40 marks] lb.) Calculate the duration of the bonds stated in part (a.) [30 marks]

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