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Further, you have strong reasons to believe that the 6-month spot rate in six months will be 9%. Describe the transactions can you undertake to
Further, you have strong reasons to believe that the 6-month spot rate in six months will be 9%.
Describe the transactions can you undertake to profit from your information? Assuming that you can take out a loan of 100$ to invest.
Take out a 1-year loan at 8.12% and then invest in 6-month spot rate at 7.6% then reinvest again after 6 month at 9%
Take out a 6-month loan at 7.6% then refinance after 6 months at 9%. The proceed will be invested at the 1-year spot rate at 8.12%,
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