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Suppose you have $900 and there are 2 investments available: A pays off 5 in state 1 and 5 in state 2 and costs $5;
Suppose you have $900 and there are 2 investments available: A pays off 5 in state 1 and 5 in state 2 and costs $5; claim B pays off in 3 in state 1 and 1 in state 2 and costs $2.20. What are the values of unit contingent claims in states 1 and 2? Draw the market opportunity line, indicating the parts of this line where short selling is necessary. Suppose you have $900 and there are 2 investments available: A pays off 5 in state 1 and 5 in state 2 and costs $5; claim B pays off in 3 in state 1 and 1 in state 2 and costs $2.20. What are the values of unit contingent claims in states 1 and 2? Draw the market opportunity line, indicating the parts of this line where short selling is necessary
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