Multiple Choice
A $100 face value one-year risk-free discount bond is priced at $95. After one year, the two-year bond will be worth either $91 or $97. What (rounded to the nearest dollar) is the highest possible price of the two-year bond that is arbitrage-free?
A) $91
B) $92
C) $95
D) $97
Correct Answer:
Verified
Correct Answer:
Verified
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Q2: A $100 face value one-year risk-free discount
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