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3. K = 2, N = 1, r = 1, So = 7, and Si(wi) = 12, S1(w2) = 8. (a) Verify the law of

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3. K = 2, N = 1, r = 1, So = 7, and Si(wi) = 12, S1(w2) = 8. (a) Verify the law of one price hold. (b) Find one trading strategy which is a strong arbitrage. (c) If you can change the interest rate r, keeping everything else unchanged, what is the range of r you can take so that there is no strong arbitrage? no arbitrage? 3. K = 2, N = 1, r = 1, So = 7, and Si(wi) = 12, S1(w2) = 8. (a) Verify the law of one price hold. (b) Find one trading strategy which is a strong arbitrage. (c) If you can change the interest rate r, keeping everything else unchanged, what is the range of r you can take so that there is no strong arbitrage? no arbitrage

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