Question 16 (15 points) Suppose the gold price is 400/oz, the 1-year forward price is 410.12, and the continuously compounded risk-free rate is 5%. (a) Does the gold lease market exist? Why or why not? Briefly explain it. If so, what is the lease rate? (5 points) (b) Demonstrate a reverse cash-and-carry strategy that provides the zero cash flow at time and the maturity date by using a TC table (10 points) co Format V BIU ... Question 17 (20 points) The par coupon rates on a 1-year and 2-year treasury bonds are 4.5% and 7.5%, respectively. You need to show how to obtain the answer briefly. (a) What is the 1-year effective yield on a 2-year zero coupon bond? (6 points) (b) What is the implied forward rate between 1 year and 2 years from now? (6 points) (c) Suppose in the market the forward rate agreement between 1 year and 2 years from now is available at 10%. Demonstrate the arbitrage that you earn by using a transaction-cash flow table. (8 points) Format BIO Question 16 (15 points) Suppose the gold price is 400/oz, the 1-year forward price is 410.12, and the continuously compounded risk-free rate is 5%. (a) Does the gold lease market exist? Why or why not? Briefly explain it. If so, what is the lease rate? (5 points) (b) Demonstrate a reverse cash-and-carry strategy that provides the zero cash flow at time and the maturity date by using a TC table (10 points) co Format V BIU ... Question 17 (20 points) The par coupon rates on a 1-year and 2-year treasury bonds are 4.5% and 7.5%, respectively. You need to show how to obtain the answer briefly. (a) What is the 1-year effective yield on a 2-year zero coupon bond? (6 points) (b) What is the implied forward rate between 1 year and 2 years from now? (6 points) (c) Suppose in the market the forward rate agreement between 1 year and 2 years from now is available at 10%. Demonstrate the arbitrage that you earn by using a transaction-cash flow table. (8 points) Format BIO