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Consider three securities that pay risk-free cash flows over the next three years and that have the current market prices shown here: Security Name Price

Consider three securities that pay risk-free cash flows over the next three years and that have the current market prices shown here:

Security Name

Price Today ($)

Cash Flow in One Year ($)

Cash Flow in Two Years ($)

Cash Flow in Three Years ($)

B1

$94.70

100

0

0

B2

$88.50

0

100

0

B3

$411.60

0

0

500

Calculate the no-arbitrage price, or the price that eliminates any arbitrage opportunities, of a new security, B4, that pays risk-free cash flows of $100 in one year and $500 in two years.

The current no-arbitrage price of Security B4 is:

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