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3. (10 marks) Suppose there is a security that pays $50 today, $50 in one year and $50 in two years. Assume the risk-free interest

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3. (10 marks) Suppose there is a security that pays $50 today, $50 in one year and $50 in two years. Assume the risk-free interest rate is 7%. (i) What is the no-arbitrage price of the security today immediately before It pays the first $50 ? (ii) Suppose immediately after you receive the first payment your friend offers you $95 for the security. Should you take it? Explain

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