Hi,

In my homework question, Im asked to calculate the price of arrow securities based on a matrix of returns and 2 given prices q1 and q2 (5,3).

This is done by multiplying the inverse of the matrix of the returns by (5,3).

Please can you help me multiply the matrix of prices (5,3) by the inverse of the matrix of returns (image attached for matrix of returns).

I understand that to get the result, I must invert the 2x2 matrix, by calculating 1/determinant x adjugate and then multiply by matrix (5,3), but i am getting a result of (7/5,-3/5 - which implies arbitrage which is not correct).

The correct answer is (1/5, 7/5). Please show me the steps in getting this result. Attached is the matrix of returns, matrix of prices and the solution from my tutor

c. Two important formulaes = ar and D = Here r is the matrix of payoffs, r = 4 1 3 2 in this case. q is the vector of real assets' prices, q = (5,3), a = (01, a,) is the vector of Arrow securities prices. r is the inverse matrix to matrix r, r = 2 -1 3 4 . Check that roper br = 1= 1 0 0 1 Using a = q .p-, follows a = (, ;) . Both a1, 02 are positive, there is no arbitrage