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1. Write down and briefly explain the relation between the formulate for Macaulay duration and the price of a bond.

2. Identify the 3 most important factors that make one option more expensive than another and briefly explain their impact.

3. What is “arbitrage”? Give an example of the use of an “arbitrage argument”. Why is this sort of argument so important in financial theory and in economics generally?

Financial Management, Finance

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