Suppose that you are about to invest in a 2-year bond with a 2% coupon rate and $100 par

value. The yields-to-maturity on zero coupon bonds of similar risks are shown below. What

is the no-arbitrage value of the 2-year bond? If the current market price of the 2-year bond is

higher than the no-arbitrage value, then how would you exploit the arbitrage opportunity?

Maturity (Year): 0.5,1,1.5,2

Yield (%): 0.6,0.8,1,1.2