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1. What isthe risk-free rate if there is no arbitrage? A security costs $70 pays $100 if team A wins or $0 if team A
1. What isthe risk-free rate if there is no arbitrage?
A security costs $70 pays $100 if team A wins or $0 if team A losses
B Security costs $25 pays $100 if team B wins or $0 if team B losses
2. What strategy would you use to take advantage of this if the risk-free rate is 2%?
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