The YTM of a $1000 bond with 10% coupon rate, semiannual coupons, and two years to maturity is 6.5% APR, compounded semiannually.

1. suppose the market price of this bond currently is $980. is there an arbitrage opportunity?

2. is this bond undervalued or overvalued by the market?

a. I don't know, b. undervalued , c. overvalued

3. should you long or short this bond?

a. I don't know, b. long, c. short

4. how much will be your arbitrage profit?

$83.72 $31.39 $0.00 $84.66 $7.31