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 ($) Cash Flow Cash Flow
in One Year ($) in Two Years ($)
B1 94 100 0
B2 85 0 100
1) What is the no-arbitrage price of a security tht pays cash flows of $100 in one year and $100 in two years?
2) What is the no-arbitrage price of a security tht pays cash flows of $100 in one year and $500 in two years?
3) Suppose a security with cash flows of $50 in on year and $100 in two years is trading for a price of $130. What arbitrage opportunity is available?© BrainMass Inc. brainmass.com October 16, 2018, 11:11 pm ad1c9bdddf
Please see the attachment for solution.
1) What is the no-arbitrage price of a security that pays cash flows of $100 in one year and $100 in two years?
The no-arbitrage price of a security that pays cash flows of $100 in one year and $100 in two years = 94 +85
= $179 (since this is ...
The solution discusses the determination of the no-arbitrage price of a security.
Legal and Security Implications of E-Businesses
You are required to research and analyze the legal and /or security implications of implementing an e-business system in an enterprise.
Imagine you are launching a website where customers can buy online.
- What kind of security threats are out there.
- What security measures do you need to take? What can you do to avoid security breaches both from inside and outside the organization?
- What about SSL certificates?
- You also need to think about the data you are collecting.
- What will you do with that data?
- What are your legal responsibilities regarding data.
- What options are open to you in terms of payment processing? If you hire a third party can they look after security for you?
- What must you do to comply with the distance selling act
- What about copyright?