Question: You work for Innovation Partners and are considering creating a new security. This security would pay out $ 1 0 0 0 in one year

You work for Innovation Partners and are considering creating a new security. This
security would pay out $1000 in one year if the last digit in the closing value of the
Dow Jones Industrial index in one year is an even number and zero if it is odd. The
one-year risk-free interest rate is 5%. Assume that all investors are averse to risk.
a) What would be the risk-premium on this security? Its expected return?
b) What would the securitys price be?

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