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Your friend agrees to pay you $1,000 if the S&P500 Index is above $4,000 exactly one year from today. Today, you pay $350 for the

Your friend agrees to pay you $1,000 if the S&P500 Index is above $4,000 exactly one year from today. Today, you pay $350 for the right to enter the bet. r=8%. The Index will end up above $4,000 with probability = 0.7. For this to be a fair bet, how much must you agree to pay if the Index is below $4,000?

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