If the implied repo rate is lower than the borrowing rate $R_b $and the lending rate $R_{\ell}$ for the same maturity,what strategy would you adopt to undertake an arbitrage?
A)Buy the asset spot,sell it forward,lend at rate $R_{\ell}$

B)Buy the asset spot,sell it forward,borrow at rate $R_b $

C)Sell the asset spot,buy it forward,lend at rate $R_{\ell}$

D)Sell the asset spot,buy it forward,borrow at rate $R_b $

Question

If the implied repo rate is lower than the borrowing rate $R_b $and the lending rate $R_{\ell}$ for the same maturity,what strategy would you adopt to undertake an arbitrage?
A)Buy the asset spot,sell it forward,lend at rate $R_{\ell}$

B)Buy the asset spot,sell it forward,borrow at rate $R_b $

C)Sell the asset spot,buy it forward,lend at rate $R_{\ell}$

D)Sell the asset spot,buy it forward,borrow at rate $R_b $

Quizplus · Accepted Answer

The Answer of If the implied repo rate is lower than the borrowing rate $R_b $and the lending rate $R_{\ell}$ for the same maturity,what strategy would you adopt to undertake an arbitrage?
A)Buy the asset spot,sell it forward,lend at rate $R_{\ell}$

B)Buy the asset spot,sell it forward,borrow at rate $R_b $

C)Sell the asset spot,buy it forward,lend at rate $R_{\ell}$

D)Sell the asset spot,buy it forward,borrow at rate $R_b $

If the Implied Repo Rate Is Lower Than the Borrowing RbR_b Rb​

If the Implied Repo Rate Is Lower Than the Borrowing $R_b$