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What is the no-arbitrage price of a security haveaway

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Reference no: EM132460117

Law of One Price

Security  Price Today ($) Cash-flow in in One Year ($) Cash-flow in Two Years ($)

Buffett 94 100 0

Berkshires 85 0 100

1. What is the no-arbitrage price of a security Haveaway that pays cash flows of $100 in one year and $100 in two years?

2. What is the no-arbitrage price of a security Warn that pays cash flows of $100 in one year and $500 in two years?

3. Suppose security Omaha with cash flows of $50 in one year and $100 in two years is trading for a price of $130. What arbitrage opportunity is available?

Reference no: EM132460117

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