• At Time 0, asset ABC is selling for $85 and XYZ is selling for $41.These assets' prices at Time 1 are given under two states of the economy (refer to Figure 1.1 below).Assume "short selling" is allowed.That is, you can borrow units of ABC and/or XYZ from your broker.Using the concept of "Arbitrage and the Law of One Price" discussed in class, show how you can make a riskless profit. (15 points) (See attached MS Word file for better presentation of this question, please.)
• Figure 1.1
• Time 0Time 1
• (1) State: GOOD
• ABC=$100
• XYZ=$50
• ABC=$85
• XYZ=$41
• (2) State: BAD
• ABC=$ 80