Question 1:

What is the maximum amount you are willing to pay for a share in the beginning of the1st period

Question 2:

What is the minimum amount you need to pay for a share in the beginning of the 1st period?

Question 3:

What is the expected value (average value) of a share in the beginning of the 1st period?

. You are now offered a chance to do an investment of buying shares of a stock. . All shares of stock owned at the end of each period will pay a dividend. . Dividends will be paid on all shares owned after trading in a round is complete. . Dividend paid depends on the outcome of a random process. - A random number from 1 to 10, with each integer in this interval being equally likely. This random "state" determines which column of the Dividend Table shown above is relevant. . Each of the dividend amounts listed in the bottom row of the table are equally likely to be earned on each share that you own. Random Determination of Dividends per Share . Random state: 1 2 3 4 5 6 7 8 9 10 Share Dividend: $0.40 $0.40 $0.40 $0.40 $0.40 $1.00 $1.00 $1.00 $1.00 $1.00 . There are 20 periods for yielding dividends. . All shares of the stock that you own at the end of the nal trading period (from your endowment or obtained by purchase) will be redeemed for $7.00 each. - You may also keep your money in cash. Each dollar in retained cash (from the endowment or obtained from stock sales) will earn a xed interest rate. Each dollar of cash held after trading for the round is complete will earn an amount of interest that is $0.10. Interest is paid on cash balances after trading has taken place in a round but before dividends are paid. Question 1: What is the maximum amount you are willing to pay for a share in the beginning of the lst period Question 2: What is the minimum amount you need to pay for a share in the beginning of the lst period? Question 3: What is the expected value (average value) of a share in the beginning of the 1st period