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Assume t F T2 = t F T1 (1 + T1 r T2 ) + T1 C T2 is the equilibrium situation. Also assume that

AssumetFT2=tFT1(1 +T1rT2) +T1CT2is the equilibrium situation.

Also assume that T2- T1is one year, thatT1CT2= $3 and thatT1rT2= 10%.

What statement is true about the following 2 pricestFoT1= 100 &tFoT2= 133?

they are not equilibrium prices since there is an arbitrage profit of 22

they are not equilibrium prices since there is an arbitrage profit of 20

they are equilibrium prices

they are not equilibrium prices since there is an arbitrage profit of 18

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