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Problem 4 . When borrow rate and lending rate differ, can the price be uniquely determined by the NoArbitrage principle? Please choose your answer and
Problem When borrow rate and lending rate differ, can the price be uniquely determined by the NoArbitrage principle? Please choose your answer and explain.
Yes. Noarbitrage principle can uniquely determine the price.
No It needs to be determined by external factors such as supply and demand in the market.
Problem Fixedincome instruments are based on interest rates and are generally considered 'safe investment'. However, are they really riskfree? Please choose your answer and explain.
Yfs They are riskfree.
No They are exposed to certain risks.
Problem If a bond has high yield to maturity, what does it imply about the quality of the bond? Please choose your answer and explain.
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