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A year from now, one of two things will happen: ( With 3 0 % probability ) Asset Y will cost $ 1 7 and
A year from now, one of two things will happen:
With probability Asset Y will cost $ and Asset Z will cost $ or
Asset Y will cost $ and Asset Z will cost $
Assume that today, Asset Y costs $ and Asset Z costs $ If there are no transaction costs and you can go long or short either asset, then what is your minimum arbitrage profit from trading assets Y and Z Assume that you can trade multiple units but not fractions of either asset.
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