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Now consider another 1-year rate: the rate on one-year T-bills. Call this rate RTB. It is just related to the price of the (zero-coupon)

Now consider another 1-year rate: the rate on one-year T-bills. Call this rate RTB. It is just related to the

Now consider another 1-year rate: the rate on one-year T-bills. Call this rate RTB. It is just related to the price of the (zero-coupon) T-bill via B0,1 1/(1+ RTB). Verify that if we observe = Rrepo = RTB we also have an arbitrage opportunity. Are any new assumptions required to complete this argument?

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To analyze the arbitrage opportunity involving the repo rate Rrepo and the rate on oneyear Tbills RTB lets consider the following 1 Rrepo The repo rat... blur-text-image

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