2. There are three states of the economy. Sufjan is expected to receive a bonus with the following payoffs. There are three assets traded in the market, with year-end cash flows and their current prices given by: $1 SO $0 $0 $1.0 $0.8 $1 $0.6 $0 $0.6 $0 $0 $0 $1 $1 A B Bonus $0 (**Using no arbitrage principle, can you determine today's "price" of Sufjan's bonus? (Hint: note that Sufjan's bonus is also an asset. (b) If Sufjan desires smooth consumption across the three different economic states, what can he do to achieve this? (Hint: Smooth consumption is an asset with equal payoffs at each state, and the cost to replicate these cashflows should be equal to your answer in 2 a (self-funded project).] (c) Suppose the three states represent low, medium, and high economic conditions. Among the three securities A, B, and C, can you identify which one pays off $1 in the high economic state? And which pays off $1 in the low economic state? 2. There are three states of the economy. Sufjan is expected to receive a bonus with the following payoffs. There are three assets traded in the market, with year-end cash flows and their current prices given by: $1 SO $0 $0 $1.0 $0.8 $1 $0.6 $0 $0.6 $0 $0 $0 $1 $1 A B Bonus $0 (**Using no arbitrage principle, can you determine today's "price" of Sufjan's bonus? (Hint: note that Sufjan's bonus is also an asset. (b) If Sufjan desires smooth consumption across the three different economic states, what can he do to achieve this? (Hint: Smooth consumption is an asset with equal payoffs at each state, and the cost to replicate these cashflows should be equal to your answer in 2 a (self-funded project).] (c) Suppose the three states represent low, medium, and high economic conditions. Among the three securities A, B, and C, can you identify which one pays off $1 in the high economic state? And which pays off $1 in the low economic state