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Next year the economy will either be weak or strong: * The probability is 0.35 for a weak economy. * Two primitive securities exist that
Next year the economy will either be weak or strong: * The probability is 0.35 for a weak economy. * Two primitive securities exist that will each pay out $100 in one year or $0 depending on the state of the economy. * The primitive that pays out $100 in the weak economy has price today of $40.05 * The primitive that pays out $100 in the strong economy has price today of $54.89. If the economy will be strong, Beata will keep her job. If the economy will be weak, Beata will lose her job and her income will drop by $193,933. What would Beata have to pay today to insure herself against the possible lost income? Answer in dollars and include two decimal places. Do not put '$' or , in your response
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