Question: Hi can you help solve this please? and show me all the steps please Q.5 Arbitration (10pts) a) Define and explain what an arbitrage opportunity

Hi can you help solve this please? and show me all the steps please

Q.5 Arbitration (10pts) a) Define and explain what an arbitrage opportunity is b) Using the following data, estimate the forward price of a bond, on a continuous basis: - the risk-free rates for 4 and 9 months are: 3.65% and 4.65%; - this bond pays a coupon of $40 in 4 months; - the spot price is $904; - the maturity of the forward is 9 months; c) if FO>(SO1) e rT is there an arbitrage opportunity? Explain. Q.5 Arbitration (10pts) a) Define and explain what an arbitrage opportunity is b) Using the following data, estimate the forward price of a bond, on a continuous basis: - the risk-free rates for 4 and 9 months are: 3.65% and 4.65%; - this bond pays a coupon of $40 in 4 months; - the spot price is $904; - the maturity of the forward is 9 months; c) if FO>(SO1) e rT is there an arbitrage opportunity? Explain

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