Question
Two securities have the following current prices and payoffs in two equally likely states of nature at the end of the year: Payoff () Security
Two securities have the following current prices and payoffs in two equally likely states of nature at the end of the year:
|
| Payoff () |
| |
| Security | State 1 | State 2 | Current price |
| A | 20 | 30 | 9.1 |
| B | 40 | 15 | 11.2 |
a) What is the one-period risk-free interest rate? b) Suppose now that there are three states of nature and two securities. Discuss the possibility of finding a risk-free portfolio in this scenario.
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Victorian Literature And Finance
Authors: Francis O'Gorman
1st Edition
0199281920, 978-0199281923
