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Suppose there are three states of the world: bad, medium and good A Stock has payoffs equal to (80, 102, 130) in the three states,

Suppose there are three states of the world: bad, medium and good

A Stock has payoffs equal to (80, 102, 130) in the three states, respectively.

A Bond has payoffs equal to (95, 103, 105) in the three states, respectively.

The stock is selling for $100 while the bond is selling or $98.

1. What portfolio of Arrow-Debreu securities would yield the same payoffs as the stock?

z₁=

z₂=

z₃=

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