What is the one period risk-free rate of interest

Assignment Help Financial Management

Reference no: EM131247143

Two securities have the following payoffs in two equally likely states of nature at the end of one year:

163_Table 9.jpg

Security j costs $8 today, whereas k costs $9, and your total wealth is currently $720.

a) If you wanted to buy a completely risk-free portfolio (i.e., one that has the same payoff in both states of nature), how many shares of j and k would you buy? (You may buy fractions of shares.)

b) What is the one-period risk-free rate of interest?

c) If there were two securities and three states of nature, you would not be able to find a completely risk-free portfolio. Why not?

Reference no: EM131247143

Questions Cloud

What is the monthly payment : A small business borrows $80,000 at 8.4% interest compounded monthly for 8 years. a. What is the monthly payment? b. What is the unpaid balance at the end of the first year?

How many call options must you buy : If you own 100 shares of Honeybear stock, how many call options must you buy (sell)? - If you own five put option contracts, how many shares of stock do you need?

Considering variants of the motherboard including : When considering variants of the motherboard including: Full ATX, Micro-ATX, is the difference between these boards just the size of the desktop casing or do they have a difference in power and perhaps expansion slot?

Income statements to financial planning on education : Find the case study for the Bedo's. I need to fill out the different excel sheets that vary from income statements to financial planning on education, life, estate, and insurance

What is the one period risk-free rate of interest : What is the one-period risk-free rate of interest? - If there were two securities and three states of nature, you would not be able to find a completely risk-free portfolio. Why not?

Calculate the cost for three types of fish : Design, implement, test, and debug a Visual Basic® program to create an enhanced aquarium calculator based on Week Two. Use that program and add these new features.

What are the different dressing foams : Is there a knowledge gap in ADN prepared nurses vs BSN prepared Nurses on the intervention/ treatment on pressure ulcer? Is there a translation gap of knowledge into practice for recently graduate nurses? What does evidence say are the best intervent..

Medical software systems : What is different about medical software systems as compared to home systems? Why are these differences of importance to the medical office in terms of compliance?

Specialization and generalization using uml : Illustrate specialization and generalization using UML about Students mentioned in 1 above.

User Account

All Pages