Question: On August 1 5 , 2 0 0 3 , members of the Deutsche Bank s Fixed Income Research Group are looking at data for

On August 15,2003, members of the Deutsche Banks Fixed Income Research Group are
looking at data for the day on various US Treasury Bonds. They want to compare the
output of their theoretical term-structure model with the bootstrapped zero-coupon
yield curve. The comparison will reveal if there are any possible mispricingsand thus
tradesin US Treasury Bonds.
1. Explain the role of the fixed income research group.
2. Calculate yields for the coupon paying US treasuries given in the case.
3. Bootstrap zero coupon (spot) yield curve from the given coupon paying bonds.
4. Is there an arbitrage opportunity? Show it.

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