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Consider a series of transactions carried out today: (1) purchasing the underlying asset, (2) borrowing the exact funds required to purchase the underlying asset, at

Consider a series of transactions carried out today: (1) purchasing the underlying asset, (2) borrowing the exact funds required to purchase the underlying asset, at the risk-free rate, (3) taking a short futures position that expires on the same date the loan repayment is due. If the futures contract is priced fairly, there will be a guaranteed net payoff of zero ($0) at maturity.

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