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Consider three securities that will pay risk-free cash flows over the next three years and that have the current market prices shown here: Security Price Today ($) | Cash Flow in Cash Flow in Cash Flow in Name One Year ($) Two Years ($) || Three Years ($) В1 $92.25 100 B2 $84.01 100 B3 $380.83 0. 500

Consider three securities that will pay risk-free cash flows over the next three years and that have the current market prices shown here: Security Price Today ($) | Cash Flow in Cash Flow in Cash Flow in Name One Year ($) Two Years ($) || Three Years ($) В1 $92.25 100 B2 $84.01 100 B3 $380.83 0. 500

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Consider three securities that will pay risk-free cash flows over the next three years and that have the current market prices shown here: Security Price Today ($) || Cash Flow in Cash Flow in Cash Flow in Name One Year ($) Two Years ($) Three Years ($) В1 $92.25 100 B2 $84.01 100 0. B3 $380.83 0. 500 Calculate the no-arbitrage price, or the price that eliminates any arbitrage opportunities, of a new security, B4, that pays risk-free cash flows of $500 in one year and $1,000 in three years. The current no-arbitrage price of Security B4 is: (round your answer to two decimal places)
Transcribed Image Text:Consider three securities that will pay risk-free cash flows over the next three years and that have the current market prices shown here: Security Price Today ($) || Cash Flow in Cash Flow in Cash Flow in Name One Year ($) Two Years ($) Three Years ($) В1 $92.25 100 B2 $84.01 100 0. B3 $380.83 0. 500 Calculate the no-arbitrage price, or the price that eliminates any arbitrage opportunities, of a new security, B4, that pays risk-free cash flows of $500 in one year and $1,000 in three years. The current no-arbitrage price of Security B4 is: (round your answer to two decimal places)
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