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Suppose that the current price of a stock is $ 9 2 and the expectation is that three months from now the price will be
Suppose that the current price of a stock is $ and the expectation is that three months from now the price will be either $ or $ Assume that the threemonth riskfree interest rate is and that an investor can borrow and lend at that rate.
Assuming that there are no transaction costs, explain why there is an arbitrage opportunity.
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