Consider arbitrage in the context of the term structure of interest. Here are the short and long spot rates of interest on riskless pure discount bonds, along with the forward rate of interest for intervening period. Interest is compounded semi-annually by convention. 2-year spot rate of interest -0.0325 4-year spot rate of interest -0.0475 2-year forward rate of interest, commencing year 3 -0.069 1. The market is expecting the short-term spot rate of interest to fall. Mark value: 1 Answer type: True or False 2 This is the correct arbitrage strategy: Borrow short term, invest long term, borrow forward to cover the short-term loan. Mark value: 1 Answer type: True or False 3. How much would you borrow or invest forward? (Round to the nearest dollar.) Mark value: 1 Answer type: Integer 4. What would be your arbitrage profit? (Round to the nearest dollar.) Mark value: 1 Answer type: Integer 5. That the long-term spot rate of interest differs from the short-term spot rate suggests that the yield curve can be a predictor of expectations about future inflation Explain with reference to the interest rates in this part Mark Value: 2 Answer type: Text (no more than two sentences)