2. You are given the following continuously compounded forward rates: 0r0,2=6.5%,0r2,3=8.0%, 0r2,4=8.0%, and 0r2,5=8.0%. You also know that Bond A, which matures at the end of year 5 and pays $10 at the end of year 1 through year 5 , has a face value of $100. Its price is $109.76782. (a) Compute the forward rate0r1,3. (b) Assume the price of a 1-year zero remains the same as in the previous part. If the forward rate 0r2,3 is now 7.4% instead of 8.0%, is there an arbitrage opportunity? What would be your investment strategy and how large of a profit can you make buying or selling one unit of Bond A? Assume you can buy or sell zero coupons. 2. You are given the following continuously compounded forward rates: 0r0,2=6.5%,0r2,3=8.0%, 0r2,4=8.0%, and 0r2,5=8.0%. You also know that Bond A, which matures at the end of year 5 and pays $10 at the end of year 1 through year 5 , has a face value of $100. Its price is $109.76782. (a) Compute the forward rate0r1,3. (b) Assume the price of a 1-year zero remains the same as in the previous part. If the forward rate 0r2,3 is now 7.4% instead of 8.0%, is there an arbitrage opportunity? What would be your investment strategy and how large of a profit can you make buying or selling one unit of Bond A? Assume you can buy or sell zero coupons