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Suppose 6-month forward rate 12 month from now is 15%. 12-month and 18-month spot rates are 9% and 12%, respectively. A. Determine if there is

Suppose 6-month forward rate 12 month from now is 15%. 12-month and 18-month spot rates are 9% and 12%, respectively.

A. Determine if there is an arbitrage opportunity.

B. If so, what would be your arbitrage opportunity (1) today, (2) in 12month, and (3) in 18

month?

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