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Question: Consider the following two term structures of interest rates. The market convention is compound interest, that is, the present value of one unit at

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Consider the following two term structures of interest rates. The market convention is compound interest, that is, the present value of one unit at time T is (1 + y_T)^-T. Which of the two term structures contains an arbitrage opportunity? Consider the same situation as in part a. Set up an arbitrage portfolio and calculate the net gain

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