Consider an economy with three risky assets and two dates (t=0,1) and three states at t=1. Let 123 1.4 X=214 p=1.8 131 133 be the matrix of asset payoffs at t=1 and p the 1sector of asset prices at t=0_ Suppose p3=1-2. (6) Does an arbitrage portfolio exist? [11)] ((1) Can you create a portfolio with payoff of (60, 70, 120) at t=1 and what is the t=0 price of such a portfolio? [4p] (e) Determine the (implicit) risk free rate in this economy. [4p]

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