uppose 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.
uppose 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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
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 |
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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