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Suppose that Calvin works at the bond desk at Wells Fargo. He is considering buying a zero-coupon bond that pays $1,000 when it matures in
Suppose that Calvin works at the bond desk at Wells Fargo. He is considering buying a zero-coupon bond that pays $1,000 when it matures in 2 years. The interest rate on the bond is 5%. Calculate the present value of the bond. Round to the nearest penny. Any price other than the present value of the bond would result in arbitrage. Choose the answer that best defines arbitrage and its impact on an asset's price. O Arbitrage is the purchase and sale of assets in the same class of risk to make a profit. One result of arbitrage is the equalization of price across assets in the same risk class. O Arbitrage is the purchase and sale of assets in a different class of risk to make a profit. One result of arbitrage is the equalization of price across assets in the same risk class. O Arbitrage is the purchase and sale of assets in the same class of risk to claim a loss. One result of arbitrage is the decline of prices across assets in the same risk class. O Arbitrage is the sale of assets in the United States to make a profit. One result of arbitrage is the increase of prices across all assets
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