What price today would make this a fair bet

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Reference no: EM131235077

A financial instrument will pay off as fo

Probability

50%

25%

12.5%

Payoff

$100

$110

$130

Probability

6.25%

3.125%

3.125%

Payoff

$170

$250

$500

(a) What price today would make this a fair bet?

(b) What is the maximum price that a riskaverse investor would be willing to pay?

Reference no: EM131235077

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