Homework Answers
| Assets | High Growth | Medium Growth | Low Growth |
| A | 30 | 60 | 80 |
| B | 60 | 50 | 40 |
| C | 30 | 60 | 60 |
| D | 50 | 25 | 0 |
The prices of the assets A,B and C are 56.60, 47.90 and 49.80 respectively.
(a) The state price of the three states are as follows,
High Growth State = 1698 + 2874 + 1494 + 0 = 6066
Medium Growth State = 3396 + 2395 + 2988 + 0 = 8779
Low Growth State = 4528 + 1916 + 2988 + 0 = 9432
(b) The risk free rate = ( 154.3 / 24277 ) x 100% ~ 0.64%
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