The city (1) purchased a 3-year, 7 percent U.S. Treasury note (2) used the note to enter into a 90-day short-term loan transaction that incorporated an interest rate of 6 percent and (3) used the proceeds from the short-term loan transaction to purchase another 3-year 7 percent U.S. Treasury note. What are the benefits and risks of the city’s investment practices? Is this considered arbitrage abuse? Explain

Answer rating: 100% (QA)

The benefits are 1 It results in 1 percent profit for every pair of buysell 2 Once the last p... View the full answer