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You are in a two-period world where a risk-free and risky asset are traded, see the figure below for the prices and payoffs. You
You are in a two-period world where a risk-free and risky asset are traded, see the figure below for the prices and payoffs. You have a project that costs 2 at time zero and pays 4 in the up and then up state, 3 in the up and then down state, 2 in the down and then up state, and 1 in the down and then down state. What is the NPV of this project? (1.05, 1.2) Up (1.05, 1.1) Down Up (1.052, 1) (1, 1) Down (1.052, 1) Up (1.05, 0.9) Down (1.052,0.8)
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