What arbitrage strategy could be set up to gain

Reference no: EM133715716

Question: Consider two zero coupon bonds: one has 3-years to maturity and yields a continuously compounded rate, r(0,3) = 10%, while the second has 5 years to maturity and yields a continuously compounded rate, r(0,5) = 5%. Discuss whether this scenario is possible, and, if not, what arbitrage strategy could be set up to gain from the mispricing.

Reference no: EM133715716

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