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Suppose the current term structure has r _ 1 = 0 . 0 7 and r _ 2 = 0 . 1 . Suppose Alex
Suppose the current term structure has r and r Suppose Alex offers a year loan of amount to begin one year from now at the annual interest rate of and that Betty accepts the terms of the loan. One of the parties has an arbitrage opportunity by using two additional loans that begin now one being a year loan and the other being a twoyear loan Who has the arbitrage opportunity and how much do the make at the end of year
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