1. Assume all rates are annualized with semi-annual compounding. Please be explicit about how you derive your results and round to four decimals after the comma. $100 par of a 0.5-year 12%-coupon bond has a price of $104. $100 par of a 1-year 14%-coupon bond has a price of $108. a. What is the price of $1 par of a 0.5-year zero? b. What is the price of $1 par of a 1-year zero? c. Suppose $100 of a 1-year 10%-coupon bond has a price of $99. Is there an arbitrage opportunity? If so, how? d. What is the 0.5-year zero rate? e. What is the 1-year zero rate? f. What is the 1-year par rate, i.e., what coupon rate would make the price of a 1-year coupon bond equal to par? g. Considering the shape of the yield curve, should the yield on the 1-year 14%-coupon bond be higher or lower than the 1-year par rate?