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. This question refers to the to the law of one price where different securities with the exact payments should have the same intrinsic value.
Please answer the following questions.
a) Are these prices correct? (meaning no arbitrage opportunities)
b) If not, show how you can capture arbitrage profit in this case.