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Assets A and B have the same spot price of $100 today. Over the next year, asset A either increases to $120 with a probability
Assets A and B have the same spot price of $100 today. Over the next year, asset A either increases to $120 with a probability of 99% or increases to $101 with a probability of 1%. Over the same time period, asset B either increases to $121 with a probability of 1% or decreases to $0 with a probability of 99%. The 1-year risk-free spot rate is 10% continuously compounding. Which of the following is true if neither asset is paying dividends within the next year?
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