question archive The Price of Risk 20
The Price of Risk 20
Subject:FinancePrice: Bought3
The Price of Risk 20. The table here shows the no-arbitrage prices of securities A and B. Cash Flow in One Year Weak Economy Strong Economy Market Price Today Security Security A Security B 231 0 600 346 600 0 a. What are the payoffs of a portfolio of one share of security A and one share of security B? b. What is the market price of this portfolio? What expected return will you earn from holding this portfolio? c. What is the risk-free interest rate?
