Bonds [6] You observe the following three bonds: Bond A B C Price 95 90 85 Cashflow

Question:

Bonds [6]

You observe the following three bonds:

Bond A

B C

Price 95 90 85 Cashflow in period 1 2 3 100 0 0 10 110 0 10 10 110 1. What is the current value of receiving one dollar at time 3?

Consider now the bond D, with the following characteristics Cashflow in period Bond 1 2 3 20 20 2. What is the current price of bond D?

520 Consider next bond E, which last for four periods. Bond E has the following characteristics:

Cashflow in period Bond 1 2 3 4 10 10 10 110 3. If the market does not allow any free lunches (arbitrage), what is the maximal price that bond E can have?

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