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Suppose the spot price of an investment asset that provides no income is $30 and the risk-free rate for all maturities (with continuous compounding) is
Suppose the spot price of an investment asset that provides no income is $30 and the risk-free rate for all maturities (with continuous compounding) is 10%. Suppose that the three-year futures price is quoted at $41. Assume that there is no transaction cost. How can an arbitrageur generate riskless profits from this case? Please provide as many details as possible in explaining your strategy.
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