(a) A 10-year semi-annual bond with face value $1,000 carries an 8% coupon. Twelve semi-annual coupons have been paid so far. The last paid coupon was 100 days ago.

If the required return of this bond is 15%, compute the full (dirty) price of the bond today. (Assume 182 days between the last paid and next coupons)

(b) Today, a 2-year zero coupon bond costs $80, and a 1-year zero coupon bond costs

$88. If you can lend or borrow forward 1 year for 1 year period (i.e. 1f2) at 12%, what is the arbitrage profit in todays dollar on every $100 that you borrow or lend? (Given that the bonds face value is $100)