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

Security	Price Today	Cash Flow in One Year	Cash Flow in Two Years
B1	$285	$300	0
B2	$264	0	$300

a. What is the no-arbitrage price of a security that pays cash flows of $ 300

in one year and $ 300 in two years?

No-arbitrage Price is ___ (Round to the nearest dollar.)

b. What is the no-arbitrage price of a security that pays cash flows of $ 300 in one year and

$ 2 comma 100 in two years?

The no-arbitrage price is __(Round to the nearest dollar.)

c. Suppose a security with cash flows of $ 150 in one year and $ 300 in two years is trading for a price of $ 390

What arbitrage opportunity is available? (Select the best choice below.)

A.

Sell two shares of the security and buy one share each of B1 and B2.

B.

Buy two shares of the security and sell one share of B1 and two shares of B2.

C.

Buy two shares of the security and sell one share each of B1 and B2.

D.

Sell two shares of the security and buy one share of B1 and two shares of B2.