I am working on number 5, and I can't figure out how to get the answer that was posted for it (mainly the highlighted spots) Please show the formulas I am supposed to use.

a. Suppose in the market the FRA between 1 year and 3 years from now is available at 7%. Demonstrate arbitrage that you earn by using a transaction-cash flow table. (5 points) b. Suppose you enter into the 3-year interest rate swap contract. What is the swap rate? (5 points) 5. Draw a binomial tree for an American put option with So 41,K- 40, = 0.3, r = 0.08, = 0, h 0.3333, T 1. Clearly specify the early exercise node if there is any. In addition, specify and B only at the first node. (10 points) 6. Suppose the price of 2-year zero coupon bond is 0.8763. (Use the continuous compounding.) Assume that the price of S&P 500 index is So 1200, the continuous annual dividend is 1.5%, and the volatility of S&P 500 index is 30%. Consider the equity linked CD that after 2 years pays S2 + max(0,s-So). For what will the bond sell at par? (7 points) continuous compounding.) Assume that the price otnd