You observe the following on-the-run Treasury securities in the market:

6-month Treasury bill yields 5.25% p.a.

Two-year Treasury note coupon 6.00% p.a.

Five-year Treasury note with coupon 7.5% p.a.

Assume all Treasury securities with maturity over 6-month have par of 100 and pay semi-annually.

Using above information to fill in the missing observations in the theoretical spot rate curve below. (10 marks)

Year (Period)	Yield to Maturity (%)	Spot Rate (%)
0.5 (1)	5.25	5.25
1.0 (2)		?
1.5 (3)		?
2.0 (4)	6.00	?
2.5 (5)		?
3.0 (6)		?
3.5 (7)		6.82
4.0 (8)		7.10
4.5 (9)		7.38
5.0 (10)	7.50	7.67

 2-year Treasury note is trading at $95, is there an arbitrage opportunity? If so, what is your arbitrage strategy and what is your expected profit? 

What is the market consensus of the spot rate after 4.5 years? 

10-year Treasury bond is trading at $96 at the moment. 

Assume all your coupon income can be reinvested at 8.5% for the next five years. 

Based on the remaining coupon payments, what will be your holding period return over 5-years on this bond if market interest rate stays constant at the forecasted level after 5 years?