The city (1) purchased a 3-year, 7 percent U.S. Treasury note (2) used the note to enter
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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
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