Question
2. Weather forecaster Surerain is so certain it will rain on Sunday that he would offer a bet of 3:2 that it will happen. Remember,
2. Weather forecaster Surerain is so certain it will rain on Sunday that he would offer a bet of 3:2 that it will happen. Remember, if it rains after someone bets with Surerain, Surerain keeps all of the money. If it does not rain, then Surerain pays the better $3 for each $2 that was wagered. On a different channel, Fullsun is confident that on Sunday it will not rain; she offers 4:3 odds.
(a) A person has $100. Set up a hedge where the person will win the same amount of money no matter what happens on Sunday.
(b) Draw the two profit lines.
(c) How much money is the person guaranteed to win no matter what happens?
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