(Answered) How can you profit from opportunity

Finance

Problem: Suppose you can borrow money for 2 years at 12% per annum (compounded annually) with interest paid annually. At the same time money can be left for 12 months at 10% per annum (compounded annually) in year 1 and 15% per annum (compounded annually) in year 2. Assum you are borrowing 1000. Explain your answers and provides examples.

Questions:

1) How can you profit from this opportunity?

2) What interest rate per annum (compounded annually) over the two year period will prevent the existence of these arbitrage opportunities?

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