At time 0.5, the price of $1 par of a zero maturing at time 1 will be either $0.97 or $0.99. Consider two other assets. Asset #1 pays off $1 at time 0.5 if the price of the zero maturing at time 1 is $0.97 and pays off o, otherwise. Asset #2 pays off $1 at time 0.5 if the price of the zero maturing at time 1 is $0.99 and pays off o, otherwise. The prices today of Assets #1 and #2 are both $0.46. This information is summarized below. Asset #1 Asset #2 Time 0 Time 0.5 Time 0 Time 0.5 50 $0.46