A6 [Type] A 1 year government bond with no counter-party default risk is trading at 980, and a similar 2 year bond at 950. Both bonds have par value 1,000. A 1 year forward rate agreement for lending between 1 year from now and 2 years from now is being offered at 3%. Outline clearly a trading strategy to take advantage of the arbitrage opportunity that exists, and explain in full how the strategy provides arbitrage. [6]