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Exercises. 1. Three 2-year bonds have the following cash flows and prices: A. (2,3), PA = 2.5 B. (3, 4), PB = 3.6 C. (4,5), Pc 4.8 Is there any arbitrage opportunity? How can you change Pc so there is no arbitrage opportunity? 2. Three 4-year bonds have the following cash flows and prices: A. (2, 2, 2, 3), PA = 2.5 B. (3, 3, 3, 4), PB = 3.6 C. (4, 4, 4, 5), Pc = 4.8 Is there any arbitrage opportunity? How can you change Pc so there is no arbitrage opportunity?

Exercises. 1. Three 2-year bonds have the following cash flows and prices: A. (2,3), PA = 2.5 B. (3, 4), PB = 3.6 C. (4,5), Pc 4.8 Is there any arbitrage opportunity? How can you change Pc so there is no arbitrage opportunity? 2. Three 4-year bonds have the following cash flows and prices: A. (2, 2, 2, 3), PA = 2.5 B. (3, 3, 3, 4), PB = 3.6 C. (4, 4, 4, 5), Pc = 4.8 Is there any arbitrage opportunity? How can you change Pc so there is no arbitrage opportunity?

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
Problem 1PS
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Exercises. 1. Three 2-year bonds have the following cash flows and prices: A. (2,3), PA = 2.5 B. (3, 4), PB = 3.6 C. (4,5), Pc 4.8 Is there any arbitrage opportunity? How can you change Pc so there is no arbitrage opportunity? 2. Three 4-year bonds have the following cash flows and prices: A. (2, 2, 2, 3), PA = 2.5 B. (3, 3, 3, 4), PB = 3.6 C. (4, 4, 4, 5), Pc = 4.8 Is there any arbitrage opportunity? How can you change Pc so there is no arbitrage opportunity?
Transcribed Image Text:Exercises. 1. Three 2-year bonds have the following cash flows and prices: A. (2,3), PA = 2.5 B. (3, 4), PB = 3.6 C. (4,5), Pc 4.8 Is there any arbitrage opportunity? How can you change Pc so there is no arbitrage opportunity? 2. Three 4-year bonds have the following cash flows and prices: A. (2, 2, 2, 3), PA = 2.5 B. (3, 3, 3, 4), PB = 3.6 C. (4, 4, 4, 5), Pc = 4.8 Is there any arbitrage opportunity? How can you change Pc so there is no arbitrage opportunity?
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