Question: With reference to Figure 14.4, explain (a) Why there will be an arbitrage inflow at points B and B' and (b) The forces that tend

With reference to Figure 14.4, explain
(a) Why there will be an arbitrage inflow at points B and B' and
(b) The forces that tend to eliminate the net gain as arbitrage inflows continue.
Figure 14.4

i-i"(%) CIAP 3 CIA Inilow Forward Forward Discount ' A -2 CIA Outtlow -3

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