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Bond A, bond B and Bond C pay $110, $105 and $120 at the end of year 2 respectively; these bonds do not have cash
Bond A, bond B and Bond C pay $110, $105 and $120 at the end of year 2 respectively; these bonds do not have cash flow at end of period 1, and offer the same risk and return characteristics. If bond A is selling for $100, bond B for $95, and bond C for $105, does the law of one price hold? If not, describe the arbitrage that would restore the law of one price.
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