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Please do part B and C. Thanks Your Name: 1. Suppose security C pays $800 if the economy is weak and $200 if the economy
Please do part B and C. Thanks
Your Name: 1. Suppose security C pays $800 if the economy is weak and $200 if the economy is strong. Risk free rate is 5% and the market index security (MIS) pays $800 and $1400 is the economy is weak and strong, correspondingly. MIS is priced at $950 a) What is the no-arbitrage price of security C? b) What is the expected return of security C? c) What is the risk premium of security C? Your Name: 1. Suppose security C pays $800 if the economy is weak and $200 if the economy is strong. Risk free rate is 5% and the market index security (MIS) pays $800 and $1400 is the economy is weak and strong, correspondingly. MIS is priced at $950 a) What is the no-arbitrage price of security C? b) What is the expected return of security C? c) What is the risk premium of security CStep by Step Solution
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