All following Treasury bonds make semiannual coupon payments. Coupon rate Bond Years Face Price 0.5 3.2% 100.00 100.00 B 1.0 4.4% 100.00 100.00 1.5 5.0% 100.00 100.00 D 1.5 4.0% 100.00 99.87 1. Compute three spot rates using bonds A, B, and C (but not D). Keep 4 decimal places as a percent, e.g., 3.1234%. Answer: 0.5-year spot rate = 1-year spot rate = ; 1.5-year spot rate = Show your work. 2. Is Bond D over- or undervalued relative to bonds A, B, and C? Perform an arbitrage to capture the mispricing. You need to clearly state your arbitrage portfolio; keep 4 decimal places, e.g., buy 5.1234 Bond A+ buy 3.2345 Bond B and sell 0.2468 Bond D. You also need to compute the size and timing of your arbitrage profit. Answer: Bond D is (over or under) valued by (how much). Arbitrage portfolio: Arbitrage profit = at time