Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1 7 . A three - state pricing kernel has the following Arrow - Debreu ( AD ) prices: $ 0 . 2 0 ,

17. A three-state pricing kernel has the following Arrow-Debreu (AD) prices: $0.20, $0.30 and $0.45. What is the risk-free rate of return? [Hint: Think of the cash-flows that a risk-free investment would offer]
A) Cannot be computed with the information given
B)0.95
C)5%
D)5.26%
E)6.32%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions