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  3. 20 points suppose the risk-free rate is 8% and the

20 points Suppose the risk-free rate is 8% and the US government 1-year bond that...

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20 points Suppose the risk-free rate is 8% and the US government 1-year bond that pays $100 in one year is trading at $94. 1. What should be the fair price of this bond? 2. Is there an arbitrage opportunity? 3. Create an arbitrage strategy to gain the arbitrage profit (please specify the actions that needs to be taken)

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