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1. Given the following, does the law of one price hold? If not, what action should an investor take? Cash Flows in Period Bond 2

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1. Given the following, does the law of one price hold? If not, what action should an investor take? Cash Flows in Period Bond 2 Price 100 80 90 1,100 1,080 1,090 970 936 980 Assume a bond with cash flows of $100 each year and a principal payment of S1,000 in five years and a current price of $960. What is A. Its current vield? B. Its vield to maturity? 2

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