Suppose there are two possible states for the economy over the next year, boom or bust, and these two states are equally likely to occur. An asset you may invest in has a payoff forecast of £160 million in the boom state and t64 million in the bust state. The risk-free rate is 20% and a risk premium of 20% is required for assets with similar risk features. What is the maximum price you would agree to pay for this asset today? the question is related to risk management.

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Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.