Suppose that there are two possible states of the economy next period: high (H) and low (L). Available in the capital market are two risky securities, R₁ and R₂, and a riskless bond, B. The state-contingent payoffs and current market prices of these instruments are presented in Table 1.1. Examine whether there are riskless arbitrage opportunities.

Table 1.1

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TABLE 1.1 State-Contingent Payoffs and Prices of Securities Security R R B H $100 0 $50 Payoff in State L 0 $100 $50 Current Price $40 $40 $43