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Consider an asset that costs $120 today. You are going to hold it for 1 year and then sell it. Suppose that there is a
Consider an asset that costs $120 today. You are going to hold it for 1 year and then sell it. Suppose that there is a 25 percent chance that it will be worth $100 in a year, a 25 percent chance that it will be worth $115 in a year, and a 50 percent chance that it will be worth $140 in a year.
figure out what the investment's average expected rate of return would be if its current price were $130 today.
At what price would the asset have a zero average expected rate of return?
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