Assume all bonds have a par value of $100. The 1-year spot rate is 1% and the 2-year spot rate is 2%. Bond X is a 1 -year zero coupon bond and BondY is a 2 -year 5% bond paying annual coupons. FN2190: ASSET PRICING AND FINANCIAL. MARKETS IRENE YAP, CFA Page 12 (a) Calculate the price of Bond Y. (5 marks) (b) Calculate the price of Bond Z, a 2-year bond paying coupons of 10% annually using these spot rates. (5 marks) (c) You observe that Bond Z is trading at $110. Demonstrate how you can take advantage of this arbitrage opportunity to make a riskless profit, using bonds X and Y. Show all workings. (15 marks)