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Spot 1 year Spot Spot 2 year 3 year 6.1% 7.0% Treasury Strip 5.0% BBB rated books 7.0% 8.% 9.3% Based on the information in
Spot 1 year Spot Spot 2 year 3 year 6.1% 7.0% Treasury Strip 5.0% BBB rated books 7.0% 8.% 9.3% Based on the information in the above table, and assuming there is an arbitrage opportunity, which of the following statemen is correct. O A. Probability of payment for year 1 is higher than the probability of payment for year 2. OB. The probability of defaulting of year 2 is equal to the probability of defaulting of year 1 OC. Probability of payment for year 1 is less than the probability of payment for year 2. OD. None of the above statement is correct
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