There are two states of economy denoted as State A and B. Primary Security A is priced

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There are two states of economy denoted as State A and B. Primary Security A is priced to be $0.35 and risk free interest rate is 12%

(A) What is the price of primary security B

(B) If BMI's stock is forecasted to be either $95 if state A occurs and $65 if state B occurs. What will be the price your willing to pay for BMI stock today?

Related Book For answer-question

An Introduction to the Mathematics of Financial Derivatives

ISBN: 978-0123846822

3rd edition

Authors: Ali Hirsa, Salih N. Neftci

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Posted Date: Feb 21, 2024 04:13 AM

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There are two states of economy denoted as State A and B. Primary Security A is priced

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To calculate the price of primary security B we need to use the concept of arbitrage pricing In an a... View the full answer

An Introduction to the Mathematics of Financial Derivatives

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