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Mr. Ralbracht qualifies for his companys low interest loans. This allows him to borrow up to $20,000 for two years at an effective interest rate
Mr. Ralbracht qualifies for his companys low interest loans. This allows him to borrow up to $20,000 for two years at an effective interest rate of 2.5%. Mr. Ralbracht does not have any need to borrow money. However, he observes that two-year Treasury notes are currently selling so as to provide an investor an annual effective yield of 3.72%. Treasury notes pay interest semiannually. Describe in detail the arbitrage opportunity available to Mr. Ralbracht.
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