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.