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Using the Exhibit 6 on page 4 4 in the first reading, consider another situation. Suppose we observe that AXE Electronics is worth $ 1

Using the Exhibit 6 on page 44 in the first reading, consider another situation. Suppose we observe that AXE Electronics is worth $110 today, and one period later will be worth either $154 or $64. The other stock, BYF Technology, is today worth $75 and one period later will be $102 or $40.80. Assume that the risk-free borrowing and lending rate is 5%. Also assume no dividends are paid on either stock during the period covered by this example. Design a trade(s) similar to Exhibit 7 and show is there an arbitrage opportunity under the new prices for the two stocks. Show all your work!
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