Suppose, in a Binomial Model, the safe rate r is strictly smaller than the down-tick factor d. Which of the following (if any) apply:

1. There are no arbitrage opportunities.

2. There is an arbitrage opportunity: Go long the safe asset, financed by the sale of one unit of the risky asset.

3. There is an arbitrage opportunity: Go long two shares the risky asset, financing this trade by lending cash at the safe rate r.

-4.One cannot know, as the risky asset's return is a random variable.