1. Suppose that you are considering becoming a market maker for AAO stock. It is common knowledge that with probability 1/2 the future stock price will be $20 and with probability /2 the future stock price will be $10. Traders arrive to you randomly, and you have figured out that 80 percent of all traders are liquidity traders and 20 percent are informed traders. Liquidity traders buy and sell with equal probability, and their orders are not price sensitive. Informed traders know for sure what the future stock price will be, and they will buy if the future price is $20, and sell if the future price is $10. a. Use the formulae below to determine the ask price and bid price and tell me what spread you will charge: Ask = $10* P(V= $10 B) + $20* P(V=$20|B )= P(V=$10 B) = 0.5*(A)/(0.5*(A)+0.5*(B)) = P(V=$20 B) = 0.5*(B)/(0.5*(A)+0.5*(B)) = where A is probability that a random trader will buy if true value is $10 and B is the probability that a random trader will buy if the true value is $20