Given the following, does the law of one price hold? If not, what action should an

investor take?

Cash Flows in Period

Bond 1 2 Price

A 100 1,100 970

B 80 1,080 936

C 90 1,090 980

2. Assume a bond with cash flows of $100 each year and a principal payment of $1,000

in five years and a current price of $960. What is

A. Its current yield?

B. Its yield to maturity?