Bond A has a coupon rate of 2%, a current maturity of 2 years and a face value of $1,000. The one-year spot rate is 2.50

[answerhappygod]

Bond A has a coupon rate of 2%, a current maturity of 2 years
and a face value of $1,000. The one-year spot rate is 2.50% and the
one-year forward rate (from the end of year 1 to the end of year 2)
is 3.10%.
There are two zero-coupon bonds (Bond B and Bond C) of the
same issuer as Bond A. Both have a face value of $10. Bond B is a
one-year zero priced at $9.69 and Bond C is a two-year zero priced
at $9.45. Is there an arbitrage opportunity when you compare the
three bonds? If there is an arbitrage opportunity, indicate which
bond(s) you will sell, which you will buy, how many of each, and
what your potential arbitrage profit is. Do all your calculations
with 2decimal points.
Which of Bond A, Bond B, and Bond C has the highest
interest-rate risk? Which has the lowest interest-rate risk? (Hint:
you can answer the question without calculation.)