10. Suppose that 3-month LIBOR is 5.6% and that 6-month LIBOR is 5.4%. You are offered a forward rate today $r_{3,6}$ starting in 3 months and ending in 6-months of 5.8%. Suppose you are allowed to borrow or invest up to $1000 at the forward rate. Describe a way to make a guaranteed profit. How much is your profit?
Added by Ignacio K.
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