In a one-period financial market, the following securities are available for trade: a risk-free asset, yielding a riskless rate r = 0.25; two risky stocks, S and S2, with time-1 payoffs given by S(1)(w) = 2 S (1) (w) 1.2 S (1) (W3) = 4 = S (1) (w1) = 5 S (1) () = 2 S(1)(W3) = 1.5 1. State whether the market is complete and arbitrage-free if the two risky securities, S and S2, have time-0 prices S (0) = 1.92 and S (0) = 3. 2. Answer to the same questions of the previous point in case S (0) = 0.88 and S (0) 3.5. If the market is not arbitrage-free, provide an example of arbitrage. 3. If security S takes the following values at time t = 1 S2 (1)(w1) = 6.75 S2 (1) (w2) 3.55 S2(1)(w3) 14.75 = = and has time-0 price S (0) = 6.68, while S is as at point 1, is the market arbitrage-free and complete? 4. If the security S of point 3 has time-0 price S (0) = 8, is the market arbitrage-free? Is it complete?