Which of the following statements regarding arbitrage and, Ask an Expert

Finance

Which of the following statements regarding arbitrage and security prices is incorrect?

1. The general formula for the no-arbitrage price of a security is Price ( security) =(PV (Alll cash flows paid by the security)

2. In financial markets it is possible to sell a security you do not own by doing a short sale.

3. When a bond is under priced, the arbitrage strategy involves selling the bond and investing some of the proceeds.

4. We call the price of a security in a normal market the no arbitrage price for the security.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91672497

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