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Your most recent discovery is a way to combine sawdust and glue into surprisingly flavorful candy bar. The relevant information in the table below. Unfortunately,

Your most recent discovery is a way to combine sawdust and glue into surprisingly flavorful candy bar. The relevant information in the table below. Unfortunately, you have misplaced your own original recipe, but you remember that for every share of glue the recipe calls for twice as many shares of sawdust (otherwise, the candy would be too chewy). You also remember that a unit of glue costs twice as much as a unit of sawdust does. Finally, you know that candy bar is a redundant asset that can be replicated by your recipe. With bits missing from the table (the glue is corrosive and it makes the ink with which you wrote the relevant information fade away), the payoff to enjoying a candy bar when the weather is dry is not legible (you see it as "X").

What is the no-arbitrage price of one unit of candy bar?

image text in transcribed
state 1 (dry) state 2 (humid) price asset 1 (sawdust) 5 4 $2.25 asset 2 (glue) P Giue asset 3 (candy bar) X 15 P Candy bar

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