Consider two risk-free securities (A and B), which are traded on a normal market. They have...

 

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Consider two risk-free securities (A and B), which are traded on a normal market. They have the following cash flows (DKK) over the next two years: Security A E. F. B Price today (t=0) 36 29 Cash flow in year one (t-1) 37 0 A risk-free Security C is traded on the same normal market and has a cash flow of DKK 74 in one year (t-1) and a cash flow of DKK 93 in two years (t=2). In which interval is the no-arbitrage price of security C (DKK)? A. "B. C. D. [166; 168] 1158; 160] [64; 66] [163; 165] [155; 157] [172; 174) Cash flow in year two (t=2) 0 31 Consider two risk-free securities (A and B), which are traded on a normal market. They have the following cash flows (DKK) over the next two years: Security A E. F. B Price today (t=0) 36 29 Cash flow in year one (t-1) 37 0 A risk-free Security C is traded on the same normal market and has a cash flow of DKK 74 in one year (t-1) and a cash flow of DKK 93 in two years (t=2). In which interval is the no-arbitrage price of security C (DKK)? A. "B. C. D. [166; 168] 1158; 160] [64; 66] [163; 165] [155; 157] [172; 174) Cash flow in year two (t=2) 0 31

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To determine the noarbitrage price of security C we need to first find the present value of the cash ... View the full answer