What is the expected rate of return on security C

Reference no: EM132178261

Question - Suppose security C pays $800 if the economy is WEAK and $200 if the economy is STRONG. Risk free rate is 5% and the market index security (MIS) pays $800 if the economy is WEAK and, and $1400 if the economy is STRONG.

a) What is the no-arbitrage price of security C?

b) What is the expected rate of return on security C?

c) What is the risk premium of security C?

Reference no: EM132178261

Questions Cloud

What is the terminal or horizon-value of operations : What is the terminal, or horizon, value of operations? Calculate the value of Kendra's operations.

Write a program that initially displays all the nations : Each time a letter is typed into a textbox, the program should reduce the displayed nations to those beginning with the letters in the textbox.

What do you expect will happen to the demand for the labor : Suppose BMW runs a great ad campaign that increases demand and drives up the price of BMWs. What do you expect will happen to the demand for the labor.

Project progress and understands the ongoing challenges : How can a project manager ensure that top level management stays involved in the project progress and understands the ongoing challenges,

What is the expected rate of return on security C : Suppose security C pays $800 if the economy is WEAK and $200 if the economy is STRONG. What is the expected rate of return on security C

How the equilibrium price and quantity of labor will change : Suppose a cafe owner wants to switch to automatic espresso machines instead of paying baristas to pack the coffee grounds by hand.

Developing secure supply chain for global trade : What are the key challenges of developing secure supply chain for global trade?

Why leo workers are paid more in given year : Leo runs a bicycle repair shop. He recently examined information on wage and employment levels and noted that he employs the same number of workers today.

What would you expect to happen to the wages of men : Consider a labor market that traditionally discriminates against hiring women. Suppose a new law effectively prohibits this practice.

User Account

All Pages