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*** PLEASE ANSWER BOTH PARTS OF THE QUESTION ***3. A Two-Period Market. Consider a 2-period arbitrage-free market with 4 scenarios w1,w2, w3,w4, as indicated by the diagram below W1 u3 There are two tradable assets, Cash and SToCK; the first asset CASh is riskless and inflation- adjusted, so its share price is always 1, in every scenario. The share price of STOCK at times 0,1,2 in the different scenarios is as follows: (a) Find the risk-neutral probabilities p(wi) for the 4 different market scenarios wi (b) Now suppose that there is a third tradeable asset CLAiM whose value at time 2 in the four different scenarios is C2(ws) = 1; C2(aa) = 0 What is the share price of CLAIM at times 0 and 1 in the different scenarios?

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