A market currently consists of a claim (i.e. contract), a risky $120 stock, and a $130 risk-free bond. Suppose that in one year's time: * The claim will have a payoff of either C +- $80 or C-= $20. * The stock's price will be either S+=$150 or S-=$95. * The bond will be worth $133.90. (a) Determine the risk-neutral probability of the stock price increasing in value in one year's time. p = % to 2 decimal places (b) Use expectation to find the no-arbitrage price (or fair price) of the claim. Co = $ (c) Suppose the market price of the claim is mispriced at Co = $41.00. claims (to 4 If you short sell 5.300000 stocks, then you will be able to buy 3 bonds and decimals where necessary) and the portfolio will cost nothing to construct. After 1 year, the value of the portfolio will be: II1 = $ if the market is in the "up" state II1 = $ if the market is in the "down" state A market currently consists of a claim (i.e. contract), a risky $120 stock, and a $130 risk-free bond. Suppose that in one year's time: * The claim will have a payoff of either C +- $80 or C-= $20. * The stock's price will be either S+=$150 or S-=$95. * The bond will be worth $133.90. (a) Determine the risk-neutral probability of the stock price increasing in value in one year's time. p = % to 2 decimal places (b) Use expectation to find the no-arbitrage price (or fair price) of the claim. Co = $ (c) Suppose the market price of the claim is mispriced at Co = $41.00. claims (to 4 If you short sell 5.300000 stocks, then you will be able to buy 3 bonds and decimals where necessary) and the portfolio will cost nothing to construct. After 1 year, the value of the portfolio will be: II1 = $ if the market is in the "up" state II1 = $ if the market is in the "down" state