Consider the following forward rate agreements: From time 1 to time 2 at an interest rate...
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Consider the following forward rate agreements: From time 1 to time 2 at an interest rate of 4% From time 2 to time 3 at an interest rate of 4,8% From time 1 to time 3 at an (annualized) interest rate of 4,5%. Does any of these forward rate agreements present arbitrage opportunities? If so, show the transactions you need to undertake in order to earn arbitrage profits. Show that these transactions do indeed yield arbitrage profits. Consider the following forward rate agreements: From time 1 to time 2 at an interest rate of 4% From time 2 to time 3 at an interest rate of 4,8% From time 1 to time 3 at an (annualized) interest rate of 4,5%. Does any of these forward rate agreements present arbitrage opportunities? If so, show the transactions you need to undertake in order to earn arbitrage profits. Show that these transactions do indeed yield arbitrage profits.
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