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The following is among the most simplistic example of arbitrage. Suppose you may borrow money at 4% interest for each annum and may receive 5% in interest per annum from a threat-free governing administration bond. This could generate an arbitrage opportunity that could be exploited as follows:
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When you will find a few or maybe more results, the take a look at for no matter whether an arbitrage opportunity remains the exact same. In case the sum from the reciprocals of the chances is lower than one, then an opportunity exits.