Stock Prices Assignment | Homework For You

X’s current stock is $10 per share. X will not pay dividends and faces the following conditional prices in a year:

State Probability Price
Good 0.3 $20
Medium 0.4 $10
Low 0.3 $5

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In the Good state in a year, Y’s conditional price is $5 with an associated 25% return. Y will pay a dividend of $1 with certainty in a year (with Probability=1).

The equally weighted portfolio (50%/50%) that includes Y and X will be riskless if Y’s conditional prices in a year are:

A $15 in medium, $10 in low

B $5 in medium, $5 in low

C $15 in medium, $20 in low

D $10 in medium, $15 in low. Get Finance homework help today