8.2 The Law of One Price implies that financial instruments with the same risk and the same cash flows at the same time should have the same price.

You are given the following table containing incomplete information on four different bonds. Assume that all these bonds have the same risk, and any coupon payments are paid annually.

Bond #	1	2	3	4
	1 - year strip bond	2-year strip bond	2-year 6% coupon bond	2-year 7% coupon bond
Purchase price ($xxxx.xx)	-950.00
Time 1 cash flow	+1000.00	0	+60.00	+70.00
Time 2 cash flow	0	+1000.00	+1060.00	+1070.00
yield to maturity (xx.xx%)			5.50%

e. How many units of Bond #1 and #2 would you need to replicate the future cash flows of 1000 units of Bond #4? (2 marks)

f. Using your answer to part e above, determine the following:

i. Whats the value of 1000 units of Bond #4? (2 marks)

ii. Whats the yield of Bond 4? (2 marks)

g. Fill in the missing information in the given table: (1 mark)