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Suppose you currently hold a security valued at R750, and the prevailing risk-free rate is 5.5%. You plan to sell this security in three months the theoretical forward contract price is calculated at R760.12 and will be used to hedge against potential price declines. Now, if the dealer offers a tradable price to unlock the arbitrage profit of R745 on the forward contract, determine the arbitrage opportunity available to you, and subsequently, provide a calculation for the potential arbitrage profit?
Sagot :
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