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uppose that the risk-free bond price evolves in the following way: A(0) = 100, A(1)...

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uppose that the risk-free bond price evolves in the following way: A(0) = 100, A(1) = 103, A(2) = 110. Further suppose that a risky asset pays no dividends and has the following possible scenarios. Scenario S(0) S(1) S(2) W1 100 110 122 W2 100 110 116 100 90 100 W4 100 90 90 W3 1. (10 pts) Draw a tree for the dynamics of the stock. 2. (15 pts) Compute P*(wi), i = 1, 2, 3, 4. uppose that the risk-free bond price evolves in the following way: A(0) = 100, A(1) = 103, A(2) = 110. Further suppose that a risky asset pays no dividends and has the following possible scenarios. Scenario S(0) S(1) S(2) W1 100 110 122 W2 100 110 116 100 90 100 W4 100 90 90 W3 1. (10 pts) Draw a tree for the dynamics of the stock. 2. (15 pts) Compute P*(wi), i = 1, 2, 3, 4

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