Question
Hey I need answers to the following along with the workings. Please help Question 1 In the table below, information about the market index, asset
Hey I need answers to the following along with the workings. Please help
Question 1
In the table below, information about the market index, asset X and the risk-free asset on a given
normal market are stated. The risk-free rate next year is 1%
USDCash flow year 1
AssetMarket price((USD)Recession Boom
today(t=0) (p=50%)(p=50%)
Market index500400700
Asset X252.48150450
Risk-free asset247.52250250
In which interval is given the risk premium of asset X (stated in percent) ?
(Hint: start by determining the return of asset X in each state )
*A[17 ; 18]
B.]18 ; 19]
C.]30 ; 31]
D.]12 ; 14]
E.[21 ; 23]
F[28 ; 29]
Question 2
In the table below, information about the market index, asset X and the risk-free asset on a
given normal market are stated. The risk-free rate next year is 0.5%
USD
assetMarket price(usd)Recession Boom
today ( t=0) (p = 50%)p=50%
Market index 10008001,400
Asset X?150750
Risk-free asset?650650
In which interval is the price(USD) of asset X?
a.[610 ; 630 ]
b.]180 ; 200 ]
c.[340 ; 360 ]
*D.[340 ; 360 ]
E.[310 ; 330 ]
f.[290 ; 310 ]
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