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QUESTION 10 Market Price ($) Cash Flow in One Year ($) Security Today Poor Economy Good Economy A 450 800 0 B 300 0 800

QUESTION 10

  		1.

    Market Price ($)

    Cash Flow in One Year ($)

    Security

    Today

    Poor Economy

    Good Economy

    A

    450

    800

    0

    B

    300

    0

    800

    C

    ???

    800

    4000

    1. Calculate the no-arbitrage price for security C?
    2. Calculate value of the risk free rate.

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