1. Although you have made no deposits or withdrawals from your emergency fund savings account at the bank, the account balance has risen during the past 19 years from $13,978 to $29,917. What has been the compound annual interest rate that the bank has been crediting to your account?
2. The yield to maturity (YTM) on 1-year zero-coupon bonds is 5% and the YTM on 2-year zeros is 6%. The yield to maturity on 2-year maturity coupon bonds with coupon rates of 12% (paid anually) is 5.8%. What arbitrage opportunity is available for an investment banking firm? What is the profit on the activity?