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	$96	$100	0
B2	$88	0	$100

a. What is the no-arbitrage price of a security that pays cash flows of $100 in one year and $100

in two years?

b. What is the no-arbitrage price of a security that pays cash flows of $100 in one year and $900

in two years?

c. Suppose a security with cash flows of $50 in one year and $100 in two years is trading for a price of

$130. What arbitrage opportunity is available?