(b) What is the implied forward rate between 1 year and 2 years from now? (6 points) (c) Suppose in the market the forward rate agreement between 1 year and 2 years from now is available at 10%. Demonstrate the arbitrage that you earn by using a transaction-cash flow table. (8 points) Format ... E Question 18 (10 points) Consider the following four options: a 450-strike S&R put, a 500-strike S&R put, a 450-strike S&R call, and short a 500-strike S&R call (each option expires at the same date after 6 months and the 1-year interest rate is 4%). If P(450)=58, P(500) = 75, and C(450) = 100, what is the no-arbitrage value of C(500)? You need to show how you obtain the answer. (10 points) Paragraph BIU : E