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 StateFuture Price Asset KFuture Price Asset L 1$55$602$45$30The 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?

Answered: uppose that we can describe the world…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

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

State	Future Price Asset K	Future Price Asset L
1	$55	$60
2	$45	$30

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?

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