EZFund can raise financing at six-month Libor plus 25 bps for five years. It finds that five-year

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EZFund can raise financing at six-month Libor plus 25 bps for five years. It finds that five-year Ampco bonds (BB rated) are trading at a yield to maturity of 10%. If total return swaps linked to the BB index are currently returning 9.50% versus six-month Libor, what arbitrage trade may be available? What is the risk in this trade?

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