Default-free securities with face values

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Prices of? zero-coupon, default-free securities with face values of $1,000 are summarized in the following? table:

Maturity? (years)

Price (Per $1,000 face value 1=$973.79, 2=$940.47, 3=$906.78

Suppose you observe that a? three-year, default-free security with an annual coupon rate of 10 % and a face value of $1,000 has a price today of $1,185.63. Is there an arbitrage? opportunity? If? so, show specifically how you would take advantage of this opportunity. If? not, why? not?

How would you take advantage of the arbitrage? opportunity?

This would result in a net profit of?

Reference no: EM131783722

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