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In one year the economy will either be weak, normal or strong. The respective probabilities of these three outcomes are 0.31 for weak, 0.47 for
In one year the economy will either be weak, normal or strong. The respective probabilities of these three outcomes are 0.31 for weak, 0.47 for normal, and for strong you must determine it. Three primitive securities exist that will each pay out $100 in one year depending on the state of the economy. The primitive that pays out in the weak economy has price today of $41.79. The primitive that pays out in the normal economy has price today of $38.23. The primitive that pays out in the strong economy has price today of $9.49. Determine the risk-free rate of interest and enter it into the space provided. Answer in % to four decimal places, do not include '%' in your answer (e.g., 12.1234)
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