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Business, 13.12.2019 20:31 sawyerharper

You are a bond trader and see on your screen the following information on three bonds with annual coupon payments and par value of $100: bond coupon rate (%) maturity (year) ytm(%)
a 0 1 5.00
b 5 2 5.50
c 6 3 6.00
coupon payments are annual.

(a) what are the prices of the above bonds?
(b) construct the current term-structure of spot interest rates.
(c) explain how you would synthetically replicate a zero-coupon bond with a maturity of 3 years and a par value of $100.
(d) what should be the price of the bond so that there is no arbitrage?

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