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Suppose you want to hedge a payable in the amount of 1, maturing in 1 year: i. Borrow $ x at t = 0 on

Suppose you want to hedge a payable in the

amount of 1, maturing in 1 year:

i. Borrow $x at t = 0 on a loan at a rate of i$ per year.

$x = S($/) (1+ 1

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