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Question 13: Suppose that the current price of one share of Facebook (FB) is $200. The current price of Asset A is $108 and one-year
Question 13: Suppose that the current price of one share of Facebook (FB) is $200. The current price of Asset A is $108 and one-year T-bill gives you 10%. In one year, each holder of asset A will receive the maximum between $140 and the market price of one share of FB. However, if the market price of one share of FB will be smaller than $100, Asset A will pay you zero (instead of $140). Identify whether you can make arbitrage or not. Prove
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