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2. Consider two securities A and B. There are two possible scenarios that can happen in a year: Economic Boom (EB) and recession (R). Bond

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2. Consider two securities A and B. There are two possible scenarios that can happen in a year: Economic Boom (EB) and recession (R). Bond A pays $100 in EB and 0 in R. Bond B pays $0 in EB and $100 in R. Suppose the price of A and B are $25 and $70 respectively. (b) What would be the price of a 1-year zero (zero coupon bond) if the no-arbitrage condition is satisfied and there are no trading costs. What does the No-Arbitrage Condition imply about the price of a 1-year zero-coupon bond if there are no trading costs

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