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The following payoffs are observed in frictionless markets: Dividend next period Price next period Price today Asset 1 9 138 P1 Asset 2 9

The following payoffs are observed in frictionless markets: Dividend next period Price next period Price

The following payoffs are observed in frictionless markets: Dividend next period Price next period Price today Asset 1 9 138 P1 Asset 2 9 75 80 A. In the absence of arbitrage opportunities, p= 127. B. In the absence of arbitrage opportunities, p= 140. C. In the absence of arbitrage opportunities, p= 142. D. If arbitrage opportunities are absent, the rate of return on asset 1 equals 9%. E. None of the above.

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