Question: 2. Consider two securities A and B. There are two possible scenarios that can happen in a year: Economic Boom (EB) and recession (R). Bond

2. Consider two securities A and B. There are two possible

2. Consider two securities A and B. There are two possible scenarios that can happen in a year: Economic Boom (EB) and recession (R). Bond A pays $100 in EB and 0 in R. Bond B pays $0 in EB and $100 in R. Suppose the price of A and B are $25 and $70 respectively. (d) Can you make an arbitrage trade if trading zero-coupon bonds is costless, but trading securities A and B cost $2 per $100 face value each

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