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You are risk neutral and the risk free rate is 10%. There is no bid-ask spread or trading fee when investing at the risk free

You are risk neutral and the risk free rate is 10%. There is no bid-ask spread or trading fee when investing at the risk free rate.

Stock A: Expected price at t = 3 is $200. There is no bid-ask spread,but if you want to sell the stock at t = 3, you have to pay a $1 fee at t = 3. There is no fee to buy the stock.

Assuming you have a 3-year investment horizon, what is the most you would be willing to pay to buy stock B at t = 0?


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Firstly thats the price above which there is no purchase of Stock B by you which exists at time t 0 ... blur-text-image
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