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A risky bond pays $1000 in a year. Suppose the borrowing rate is 3% and the deposit rate is 3%. Is there an arbitrage opportunity?

A risky bond pays $1000 in a year. Suppose the borrowing rate is 3% and the deposit rate is 3%.

Is there an arbitrage opportunity? If so, determine the non-arbitrage price range of the bond (i.e. the price range at which the bond could be traded without creating an arbitrage opportunity). Explain.

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