Suppose that we can describe the world using two states and that two assets are available, asset K an asset L. We assume the asset’s future prices have the following distribution. (See attached table) The current price of asset K is $50, and the current price of asset L is $50. What is the price implied for an asset providing $100 in state 1 and $50 in state 2?
Suppose that we can describe the world using two states and that two assets are available, asset K an asset L. We assume the asset’s future prices have the following distribution. (See attached table) The current price of asset K is $50, and the current price of asset L is $50. What is the price implied for an asset providing $100 in state 1 and $50 in state 2?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose that we can describe the world using two states and that two assets are available, asset K
an asset L. We assume the asset’s future prices have the following distribution.
(See attached table)
The current price of asset K is $50, and the current price of asset L is $50.
What is the price implied for an asset providing $100 in state 1 and $50 in state 2?

Transcribed Image Text:State Future Price Asset K Future Price Asset L
|1
$55
$60
$45
$30
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