Bond A pays $10 at the end of year 1 and $110 at the end of year 2,bond B pays $5 at the end of year 1 and $105 at the end of year 2,and bond C pays $20 at the end of year 1 and $120 at the end of year 2.If bond A is selling for $100,bond B for $95,and bond C for $105,does the law of one price hold? If not,describe the arbitrage that would restore the law of one price.

Question

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The Answer of Bond A pays $10 at the end of year 1 and $110 at the end of year 2,bond B pays $5 at the end of year 1 and $105 at the end of year 2,and bond C pays $20 at the end of year 1 and $120 at the end of year 2.If bond A is selling for $100,bond B for $95,and bond C for $105,does the law of one price hold? If not,describe the arbitrage that would restore the law of one price.

Bond a Pays $10 at the End of Year 1