On March 6th, 2019 the yields of six-month and one-year Treasury bills (no coupon) are 2.50% and 2.70%, respectively. All rates in this question are annualized. Use semi-annual compounding convention. (a) What are the prices for the six-month and one-year Treasury bills today? Suppose the principal is $1,000. [5 points). (b) What is the forward rate on Treasuries between six months and a year? [5 points). (c) If the market forward rate is 3.00%, how would you make an arbitrage given your answer in (b)? [5 points). (d) What is the fair price for a US Treasury bond with a 3.00% coupon maturing on March 6th, 2020 (exactly one year from now)? The principal value is $1,000, and coupons are paid semi- annually, with the next coupon payment occurring six months from now. (Hint: How can you replicate the bond using the six-month and one-year Treasury bills?) [5 points). On March 6th, 2019 the yields of six-month and one-year Treasury bills (no coupon) are 2.50% and 2.70%, respectively. All rates in this question are annualized. Use semi-annual compounding convention. (a) What are the prices for the six-month and one-year Treasury bills today? Suppose the principal is $1,000. [5 points). (b) What is the forward rate on Treasuries between six months and a year? [5 points). (c) If the market forward rate is 3.00%, how would you make an arbitrage given your answer in (b)? [5 points). (d) What is the fair price for a US Treasury bond with a 3.00% coupon maturing on March 6th, 2020 (exactly one year from now)? The principal value is $1,000, and coupons are paid semi- annually, with the next coupon payment occurring six months from now. (Hint: How can you replicate the bond using the six-month and one-year Treasury bills?) [5 points)