Question: .15 Consider the implied forward rate between year 1 and year 2, based on Table 7.1. a. Suppose that r0(1,2)=6.8%. Show how buying the 2

.15 Consider the implied forward rate between year 1 and year 2, based on Table 7.1. a. Suppose that r0(1,2)=6.8%. Show how buying the 2 -year zero-coupon bond and borrowing at the 1-year rate and implied forward rate of 6.8% would carn you an arbitrage profit. b. Suppose that r0(1,2)=7,2%. Show how borrowing the 2-year zero-coupon bond and lending at the 1-year rate and implied forward rate of 7.2% would earn you an arbitrage profit

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