Question: CURRENT BOND PRICE = $1080, COUPON payments will be made $60 each in 6 months and 12 months. If risk free zero rates are 8%,

CURRENT BOND PRICE = $1080, COUPON payments will be made $60 each in 6 months and 12 months.

If risk free zero rates are 8%, and 8.3%, for 6months and 12 months , respectively; and forward contract delivery period is 12 months .

Questions

1) Find the equilibrium forward price

2) What is the arbitrage strategy if forward price = 1015

3) With the above arbitrage strategy, find the arbitrage profit that you'd earn.

Please show work in excel.

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