Need detailed calculations for the following:

Construct a Replicating Portfolio (RP) to replicate a 1.5-year Bond-0 that pays 6.9percent of coupon per year.

The availablebonds for replication are: a one year zero coupon Bond-1, a 1.5-year Bond-2 that pays 4.9 percent coupon per year, and a 1-year Bond-3 which pays 8.9 percentcoupon per year. All the bonds (Bond-0, Bond-1, Bond-2, and Bond-3) have the same face value of $100 and pay their annual coupons two times a year.

Compute an arbitrage trading strategy to generate profits, if any, when the currentmarket prices of the four bonds, respectively, are 100.9, 97.55, 100.22 and 103.08.

1.What is the dollar face value of Bond-1 in the RP? 2.What is the dollar face value of Bond-2 in the RP?

3.What is the dollar face value of Bond-3 in the RP? 4.What is the cost of the RP? 5.What is the arbitrage fair price of Bond-0?

6.Is Bond-0to be held long or short in arbitrage trading strategy. 7. Is Bond-1to be held long or short in an arbitrage trading strategy. 8. IsBond-2 to be held long or short in an arbitrage trading strategy. 9. Is Bond-3 to be held long or short in an arbitrage trading strategy.