Mr. Ralbracht qualifies for his company's low interest loans. This allows himto borrow up to $20,000 for two years at an effective interest rate of 2.5%.Mr. Ralbracht does not have any need to borrow money. However, he observesthat two-year Treasury notes are currently selling so as to provide an investoran annual effective yield of 3.72%. Treasury notes pay interest semiannually.

Describe in detail the arbitrage opportunity available to Mr. Ralbracht.

Answer rating: 100% (QA)

The arbitrage opportunity available to Mr Ralbracht arises from the difference in interest rates bet... View the full answer