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Bond A has default-free (i.e. riskless) payoffs with identical timing as bond B. Each of bond A's payoffs are exactly two times the payoff of
Bond A has default-free (i.e. riskless) payoffs with identical timing as bond B. Each of bond A's payoffs are exactly two times the payoff of bond B. (You can buy as many units of A and/or B as you want.)
Which of the following is true as a consequence of The Law of One Price?
Check all that apply:
Bond A should cost the same as bond B
Simple interest is more appropriate than compound interest
Bond A should cost two times bond B
The yield curve is upward sloping
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