Q8. Suppose an investment of $40 now will return $110 one period later, interest rate 10%. Then: 110 W = -40 = 60. 1.10 In a perfect market the owner of such an income stream can create any cash flow profile that satisfies: G + -2 = 60. 1.10 Hence, if this person is offered another investment opportunity that costs $10 now but pays $77 one period later, it is as satisfactory as the first. Why might this reasoning not work if there were a 1% brokerage charge on amounts borrowed