1) A bond promises a risk-free payment of $1000 in one year. The risk-free rate of interest is 3.11% .a) What is the price of the bond? (1 mark )b) If the price of the bond is actually $950, what is the arbitrage strategy? Illustrate all cash flows at time 0 andat time 1.(3 marks) c) If the price of the bond is actually $990, what is the arbitrage strategy? Illustrate all cash flows at time 0 andtime 1. (3 marks) Hint: you are able to borrow money from the bank, or deposit money into the bank, at the risk-free rate of interest. After one year you will pay back your loan plus interest, or receive your savings plus interest.