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4. (25 points) The table below shows the price and cash flow of four US government bonds. Bond Price today Year 1 Year 2 Year

4. (25 points) The table below shows the price and cash flow of four US government bonds. Bond Price today Year 1 Year 2 Year 3 A 1058.824 1080 B 942.596 1000 1,012.261 50 50 1050 D 876.297 1000 Do these prices allow arbitrage? If so, explain in detail how one can achieve arbitrage gain by buying and selling stocks in the table (assume you can buy/sell any amount of face value that you wish of these bonds). If arbitrage is not possible, prove so. show complete numerical solution

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