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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Suppose a two-year Treasury note is trading at its par value $1,000. You examine the cash flows, and if you sell them individually in the market, you get $47.85 for the six-month coupon, $45.79 for the one-year coupon, $43.81 for the one-and-a-half-year coupon, $41.93 for the two-year coupon, and $838.56 for the principal.
a. Are these prices correct?
b. If not, show how you can capture arbitrage profit in this case.
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