Consider two assets, A and B, in a competitive market populated by a large number of...

Consider two assets, A and B, in a competitive market populated by a large number of risk-averse
agents.
ForassetA: pricepA =10attime0;andpaysXA =12attime1.
For asset B: price pB = 10 at time 0; and pays, at time 1, XB = 20 with probability 0.5, and XB = 4 with probability 0.5.
a. Please calculate the expected return and the standard deviation of return for asset A. b. Please calculate the expected return and the standard deviation of return for asset B. c. Is pA = pB reasonable? Please explain.

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ekkarill92 answered 1 year ago

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