Question: Suppose that there are three dates, t=0,1,2. There are two assets, a long-lived riskless asset and a short-lived risky asset. The long-lived asset is tradable

Suppose that there are three dates, t=0,1,2. There are two assets,

Suppose that there are three dates, t=0,1,2. There are two assets, a long-lived riskless asset and a short-lived risky asset. The long-lived asset is tradable at both t=0 and t=1. It has a riskless return of R between t=0 and t=1. Between t=1 and t=2 this asset has a riskless return of either R1 or R2, with R1

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