Question: Suppose that we can describe the world using two states and that two assets are available, asset K an asset L. We assume the assets

Suppose that we can describe the world using two states and that two assets are available, asset K an asset L. We assume the assets future prices have the following distribution

State	Future Price Asset K	Future Price Asset L
1	$55	$60
2	$45	$30

The current price of asset K is $50, and the current price of asset L is $50. 3. What is the risk neutral probability of state 1? What is the risk neutral probability of state 2? 4. What is the price implied for an asset providing $100 in state 1 and $50 in state 2? 5. You plan to buy a home for $100,000 in the future. You want to guarantee that you will have the money. What would you buy/sell today to accomplish this, and what would it cost today?

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