(Use compounding yields for discounting) A bond with no coupons sells today for $66, but will pay $85 in two years (its face value). If the one-year risk free interest rate is 10%, is arbitrage possible? What position should you take?If you dont have the funds to take this position, what is the highest interest that you can take on a loan?If todays price is temporarily at $75, what position should you take? Explain how you would do it. What is the arbitrage profit?2. A financial instrument has a face value of $3000 and is presently trading for $2800. If the instrument expires in 18 months and has no coupons, find the annual yield to investors using the money-market yield convention.