Yield to maturity-what is the profit on the activity

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Reference no: EM13928166

The yield to maturity (YTM) on 1-year zero-coupon bonds is 7% and the YTM on 2-year zeros is 8%. The yield to maturity on 2-year-maturity coupon bonds with coupon rates of 11% (paid annually) is 7.7%. The arbitrage strategy is to buy zeros with face values of $110 and $1110, and respective matruities of one year and two years.

What is the profit on the activity? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM13928166

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