a) Consider a five-year $1,000 face value bond with a 6% annual coupon rate. This bond pays annual coupons. The one-, two-, three-, four- and five-year spot rates are 5.5%, 5.75%, 6.25%, 6.25%, and 6.5% respectively. What is the price of this bond? What is the yield to maturity?

b) If the bond is selling for $1,000, do you have an arbitrage opportunity? If so, please show how you build a replicating portfolio and earn an arbitrage profit. Please show the annual cash flows.