Question: Consider a one - period model with only two possible end - of - period states. Three assets are traded in an arbitrage - free

Consider a one-period model with only two possible end-of-period
states. Three assets are traded in an arbitrage-free market. Asset 1 is
a risk-free asset with a price of 1 and an end-of-period dividend of R
f, the risk-free gross rate of return. Asset 2 has a price of S and oers
a dividend of uS in state 1 and dS in state 2.

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