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Assume a security that currently trades at $990. The security entitles its owner to a risk- free cash flow of $1,000 one year from now.

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Assume a security that currently trades at $990. The security entitles its owner to a risk- free cash flow of $1,000 one year from now. The risk free interest rate is 2%. Is there an arbitrage opportunity? If yes, illustrate how an investor could exploit that opportunity. Explain in detail your answer. [8 marks]

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