Suppose that you expect the one-period interest rate between 5 and 6 years into the future to be10%, and that you observe that the price of zero-coupon bonds with 5 and 6 years to maturityto be $73.50 and $70, respectively. (the face value of the bonds is $100.)design a strategy for trading in these bonds which would yield a positive expected return atthe end of 6 years. what considerations would determine whether you undertake the strategyand, if you do, on what scale? (a) the implied forward rate between 5 and 6 years into the future equals: 5f6=p5p6-1 =73.5070.00-1 = 0.05 = 5%.given that 10% is expected, an investment strategy would be to use the bonds to borrowfunds between years 5 and 6. the funds would be invested at an expected rate of returnof 10%, yielding anexpectedreturn of10-5 = 5%.(b) proposed strategy: i. sell one 6-year bond for $70. use the proceeds to buy70/73.5≈0.95245-yearbonds. ii. at end-year 5, collect$100×70/73.5(given that each bond has face value $100).invest the $7,000/73.5≈95.24at the expected rate of 10% for one year. iii. at end year 6 collect$(1 + 0.10)×7,000/73.5≈104.76.iv. repay $100 on the 6-year bond, leaving a net profit of $4.76 per bond.(c) notice that this is a risky strategy: its success depends on being able to invest at a rate of10% for one year at the end of year 5. the extent to which an investor would be preparedto partake in the strategy would depend on how firmly the investor holds the expectationsand the investor’s risk aversion.