Consider a sequential trade model in which a security has an uncertain value. The valueVof the security can either be $150 or $250 with equal probability. The proportion of informed traders is 40%, whereas the proportion of liquidity traders is 60%. As usual, liquidity traders buy or sell withequalprobability, whereas informed traders only buy when they know the security price is high, and sell when they know the security price is low.

The conditional expectation of V, conditional that the first trade is abuy, is:

a.E[V | Buy] = 170

b.E[V | Buy] = 180

c.E[V | Buy] = 200

d.E[V | Buy] = 220

e.E[V | Buy] = 230

f.None of the above.

Consider a sequential trade model in which a security has an uncertain value. The valueVof the security can either be $150 or $250 with equal probability. The proportion of informed traders is 60%, whereas the proportion of liquidity traders is 40%. As usual, liquidity traders buy or sell withequalprobability, whereas informed traders only buy when they know the security price is high, and sell when they know the security price is low.

The conditional expectation of V, conditional that the first trade is asell, is:

a.E[V | Sell] = 170

b.E[V | Sell] = 180

c.E[V | Sell] = 200

d.E[V | Sell] = 220

e.E[V | Sell] = 230

f.None of the above.