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Jacob's goal is to buy the market index. Jacob notices the following: - Security W has a price today of $55.27 and in one year
Jacob's goal is to buy the market index. Jacob notices the following: - Security W has a price today of $55.27 and in one year it will pay $100 if the economy is weak and $0 if the economy is strong. - Security $ has a price today of $34.87 and in one year it will pay $0 if the economy is weak and $100 if the economy is strong. - The economy in one year will either be weak or strong and the probability of a strong economy is 46.0%. - In one year, the market index will have payoffs of $630 if the economy is weak and $1,417 if the economy is strong. What is the price today (assuming no arbitrage) Jacob will pay to accomplish his goal? Answer in $ and include two decimal places; do not include the ' $ ' in stour answer, e.g., 987.65 would be entered if the answer was $987.65. Your
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