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You are given the following data on different rates with the same maturity (1.5 years), but quoted on a different basis and different compounding frequencies:

• Continuously compounded rate: 2.00% annualized rate

• Continuously compounded return on maturity: 3.00%

• Annually compounded rate: 2.10% annualized rate

• Semi-annually compounded rate: 2.01% annualized rate

You want to find an arbitrage opportunity among these rates. Is there any one that seems to be mispriced?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92790814

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