A rainbow lines up with you and the sun. If you were in the air above a waterfall, for example, you could see a complete ring.
The water droplets inside the rainbow act like a mirror and reflect light back at you. As you move outward through the rainbow, the light is hitting the drops at an angle, relative to you, so it acts like a prism and refraction the light.
The light that hits the water outside the rainbow is reflected away from you.
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