Question: s.(1) = .03 S,2 = .06 S.(3) = .09 S.(4) = .12 You have the option to buy/sell next year at a special rate of

 s.(1) = .03 S,2 = .06 S.(3) = .09 S.(4) =

s.(1) = .03 S,2 = .06 S.(3) = .09 S.(4) = .12 You have the option to buy/sell next year at a special rate of 0.07 for exactly one year. Construct an arbitrage strategy involving the sale and purchase of zero coupon bonds that will make a profit with no actual investment (assuming the option turns out to hold up)

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