Consider the toss of a (loaded) coin. In a good outcome, punter (bettor) will receive 1...
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Consider the toss of a (loaded) coin. In a "good" outcome, punter (bettor) will receive £1 in 12 months. In a "bad" outcome she will not receive anything. The fair market price of this bet is £0.45 and current prevailing risk-free interest rate is 5%. What is the implied probability of a "good" outcome? Assume continuous compounding. A) 0.4223 B 0.4731 0.5269 D 0.5594 Consider the toss of a (loaded) coin. In a "good" outcome, punter (bettor) will receive £1 in 12 months. In a "bad" outcome she will not receive anything. The fair market price of this bet is £0.45 and current prevailing risk-free interest rate is 5%. What is the implied probability of a "good" outcome? Assume continuous compounding. A) 0.4223 B 0.4731 0.5269 D 0.5594
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Answer B 04731 Given Information Amount received in good outcome 1 Term months 12 Amount received ... View the full answer
Related Book For
Business Statistics A Decision Making Approach
ISBN: 978-0134496498
10th edition
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry
Posted Date:
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