An investment company is studying the creation of a financial security that will bear the symbol...

 

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An investment company is studying the creation of a financial security that will bear the symbol CSI and will give right to a payment in one year of $150 in the pessimistic scenario and $260 in the optimistic scenario. The risk-free interest rate is 3%. Consider the two financial stocks ATX and BLU whose prices in the absence of a learning opportunity are as wwwmmmm follows: mmmmmmmmmm Titles ATX BLU Price of the market today in $ 55 95 Flux in 1 year based on the scenario in $ Pessimistic 35 Optimistic 70 120 80 a) Is it possible to replicate CSI by combining ATX and BLU? (1 point) b) What is the price of CSI stock if there is no arbitrage opportunity? (1 point) c) If the probability of realization of the pessimistic scenario is 40% and that of the optimistic scenario is 60%. What is the expected return on the CSI asset? What is the risk premium? (1 point) d) If the risk premium of CSI stock is 0.75%, is there an arbitrage opportunity? (2 points) An investment company is studying the creation of a financial security that will bear the symbol CSI and will give right to a payment in one year of $150 in the pessimistic scenario and $260 in the optimistic scenario. The risk-free interest rate is 3%. Consider the two financial stocks ATX and BLU whose prices in the absence of a learning opportunity are as wwwmmmm follows: mmmmmmmmmm Titles ATX BLU Price of the market today in $ 55 95 Flux in 1 year based on the scenario in $ Pessimistic 35 Optimistic 70 120 80 a) Is it possible to replicate CSI by combining ATX and BLU? (1 point) b) What is the price of CSI stock if there is no arbitrage opportunity? (1 point) c) If the probability of realization of the pessimistic scenario is 40% and that of the optimistic scenario is 60%. What is the expected return on the CSI asset? What is the risk premium? (1 point) d) If the risk premium of CSI stock is 0.75%, is there an arbitrage opportunity? (2 points)

Answer rating: 100% (QA)

a Is it possible to replicate CSI by combining ATX and BLU 1 point ANSWER No it is not possible to r... View the full answer