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Next year the economy will either be weak or strong. Two primitive securities exist Security W has a price today of $92.25 and in one
Next year the economy will either be weak or strong. Two primitive securities exist
Security W has a price today of $92.25 and in one year it will pay $100 if the economy is weak and $0 if the economy is strong.
. Security S has a price today of $70.75 and in one year it will pay $0 if the economy is weak and \$100 if the economy is strong.
Security ABC will pay $330 in one year if the economy is weak and $490 if the economy is strong. What is the no-arbitrage price of security ABC?
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