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(a), 1 mark for part (b)). Let r_1 be interest rate with compounding frequency m_1, and let r_2 be the interest rate with compounding frequency

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(a), 1 mark for part (b)). Let r_1 be interest rate with compounding frequency m_1, and let r_2 be the interest rate with compounding frequency m_2. (a) Use a no-arbitrage argument to prove that (1 + r_1/m_1)^m_1 T = (1 + r_2/m_2)^m_2 T for all times T > 0. (b) Show r_1 = m_1 [(1 + r_2/m_2)^m_2/m_1 -1]

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