Consider a state$-$space model for the securities market, with two dates, date $0$ and $1,$ defined as follows:

There are two economic states at date $1,$ state a and state b$.$ The probability for state is $0\mathrm{.}52,$ and the probability for state is $0\mathrm{.}48.$

There is a risk$-$free bond traded in this market, with the date$-1$ payoff of $$110\mathrm{.}33,$ independent of the state. The date$-0$ price of the bond is $$100.$

There is also a risky stock traded in the market. The date$-1$ payoff of stock is $$203\mathrm{.}34$ in state a and $$72\mathrm{.}55$ in state b$.$ The date$-0$ price of the stock is $$100.$

Use the above to answer the following $($A$)($D$).$

What is the expected net rate of return on the bond?

$\%$ unanswered