Look one more time at Table 3.4.
a. Suppose you knew the bond prices but not the spot interest rates. Explain how you would calculate the spot rates. (Hint: You have four unknown spot rates, so you need four equations.)
b. Suppose that you could buy bond C in large quantities at $1,040 rather than at its equilibrium price of $1,058.76. Show how you could make a zillion dollars without taking on any risk.
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