Problem 3. (16 pts) No arbitrage price of coupon bond. We consider now a market where 4 bonds exist, namely A, B, C, D. Their cashflows are repre- sented in the following table (the unit of time is one year): Table 2: Cashflow of bonds Date 0 1 2 3 A -100 150 10 30 EX -0.8 100 C -0.7 0 10 D -0.6001 1. (4 pts) Please construct an arbitrage in this market. 2. (4 pts) In order to eliminate the arbitrage opportunity in (1), what should be the price of A? 3. (4 pts) Draw the zero-coupon yield curve (the curve describes z(0, t.) as a function of t) given by B, C, D (by using linear interpolation). (keep three significant figures) 4. (4 pts) Estimate the value of 2(0,2.5) (z as defined in question (3)). (keep four significant figures)