Arrow-Debreu securities

Suppose there are three states of the world: bad, medium and good A Stock has payoffs equal to (80, 102, 130) in the three states, respectively. A Bond has payoffs equal to (95, 103, 105) in the three states, respectively. The stock is selling for $100 while the bond is selling or $98.

1. Using Solver, find the set of A-D security prices implied by stock and bond prices. Assume that q1 = 0.5, but you have to find q2 and q3. (Hint: Your choice variables would be three cells, each containing a different A-D security price. Your objective function would be setting the value of the A-D securities comprising the portfolio yielding the stock payoffs equal to the stock price. Then you would add one additional constraint for the bond price equaling the value of A-D securities portfolio that yield the bond payoffs.) q1 = 0.5 q2 = q3 = (Enter numbers rounded to *exactly three* decimal points in the exactly the following form: "0.472". If you entered the same answer as ".472" or "0.47", your answer would be marked incorrect.)

2. Suppose A-D securities prices = (q1, q2, q3) were again equal to (0.5, 0.005, 0.4). In problem #1 (What portfolio of Arrow-Debreu securities would yield the same payoffs as the stock? z₁ = 80 z₂ = 102 z₃ = 130), you found the number of A-D securities that would yield the same payoff as the stock. What would be the value of this portfolio of A-D securities if the A-D securities prices were as given in this problem? [value] (Enter a number with one decimal point)