You observe the following bonds in the market. Assume they are risk-free and have a face...

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You observe the following bonds in the market. Assume they are risk-free and have a face value of $1,000. The market prices are described in the table below: a. Bond A B C. C D Market price today 936.885 879.664 1,129.932 840.629 Write down the timeline of the cash-flows for each bond. Assume you buy the bonds. b. What are the yields on the zero-coupon bonds? (Express the answer in percent using 3 digits. E.g., 7.456%) Bond type 1-year zero coupon bond 2-year zero coupon bond 3-year bond with a coupon of 10% 3-year zero coupon bond Is there an arbitrage opportunity? Explain. (Do NOT need to show how to exploit the arbitrage if it exists) You observe the following bonds in the market. Assume they are risk-free and have a face value of $1,000. The market prices are described in the table below: a. Bond A B C. C D Market price today 936.885 879.664 1,129.932 840.629 Write down the timeline of the cash-flows for each bond. Assume you buy the bonds. b. What are the yields on the zero-coupon bonds? (Express the answer in percent using 3 digits. E.g., 7.456%) Bond type 1-year zero coupon bond 2-year zero coupon bond 3-year bond with a coupon of 10% 3-year zero coupon bond Is there an arbitrage opportunity? Explain. (Do NOT need to show how to exploit the arbitrage if it exists)

Answer rating: 100% (QA)

a The timeline of cash flows for each bond is as follows Bond A 1year zero coupon bond Buy price 936... View the full answer