What will be the implied risk-free return

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Reference no: EM131506793

Two securities have the following payo?s:

State Future Prices Security G Future Prices Asset H

1 $10 $30

2 $20 $10

The current prices are G(1) = $8 and H(1) = $9. Both future states are equally likely. Your initial endowment (current wealth) is $720. (a) If you wanted to purchase a completely risk-free portfolio, how many units of G and H would you buy (fractional units are per-mitted)? (b) What will be the implied risk-free return?

Reference no: EM131506793

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