2. Auto Corp (25 points) Auto Corp is a company that produces cars and exists for three time periods: t-0, t-1, and te2 Between t-o and t:1, the price of steel will either rise or fall, each with probability 50%. Between ts] and t-2, the demand for Auto Corp's products will get better or worse, each with probability 50%. Both steel price risk and demand risk are uncorrelated with the market and uncorrelated with each other. The risk free rate is zero. Auto Cor steel price risk. The cash flows are expected to be $120M if demand gets bette p is currently set up so that it only receives operating cash flows in t-2 and has no exposure to r, and $50M if demand gets worse. Auto Corp has outstanding zero-coupon debt with face value of $80M due in t-2 lie. Auto Corp owes debt-holders $80M in t-2) 2. Auto Corp (25 points) Auto Corp is a company that produces cars and exists for three time periods: t-0, t-1, and te2 Between t-o and t:1, the price of steel will either rise or fall, each with probability 50%. Between ts] and t-2, the demand for Auto Corp's products will get better or worse, each with probability 50%. Both steel price risk and demand risk are uncorrelated with the market and uncorrelated with each other. The risk free rate is zero. Auto Cor steel price risk. The cash flows are expected to be $120M if demand gets bette p is currently set up so that it only receives operating cash flows in t-2 and has no exposure to r, and $50M if demand gets worse. Auto Corp has outstanding zero-coupon debt with face value of $80M due in t-2 lie. Auto Corp owes debt-holders $80M in t-2)