Help me in answering the questions below respectively

(1) Explain what is meant by the 'no arbitrage' assumption in financial mathematics. [2] (ii) A fixed interest security will be redeemed at E1 10% nominal on 1 July 2012. It has a coupon rate of 4% pa payable half yearly and interest payments are made on 1 January and 1 July each year. It is priced in the market to give a gross redemption yield 5% pa effective. Calculate the market price of this security on 1 April 2007. [3] (iii) On 1 April 2007 a two-year forward contract is issued to buy the security in (ii). If the risk-free rate of retum in the market is 3.5% pa effective, calculate the forward price of this contract. [4] (iv) On 1 July 2008, immediately after the payment of the coupon due on this date, the market price of the security is E1 05% nominal and the risk-free rate of return is 4% pa effective. Calculate the market price of the forward contract in (iii). [3] [Total 12]A fixed interest stock is redeemable at 106% in 15 years' time and pays interest at 9% pa payable half-yearly in arrears. Calculate the price an investor should pay to obtain a gross redemption yield of 9% pa. [2] Instead of purchasing the stock, the investor decides to agree a forward contract to buy the security in six years' time, immediately after the coupon payment then due. Calculate the forward price based on a risk-free rate of return of 6% pa effective and no arbitrage. The current price of the stock is that calculated in part (i). [3] Three years later, the price of the security is such that the gross redemption yield is still 9%. Calculate the value of the forward contract if the risk-free yield has not changed. [6] Calculate the yield obtained if the investor sold the forward contract after three years. [2] [Total 13]