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e) Suppose you decide to purchase a 1-year zero-coupon bond today and also contract today to re-invest the proceeds from the bond for the following

e) Suppose you decide to purchase a 1-year zero-coupon bond today and also contract today to re-invest the proceeds from the bond for the following two years at 16.5% per year. Show that this arrangement presents an arbitrage opportunity. Demonstrate how you would take advantage of this opportunity. (6 marks) f) Consider discount factors such that d1

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