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Suppose initially that two assets, A and B, will each make a single guaranteed payment of $100 in one year. But asset A has a current price of $85 while asset B has a current price of $95.

 

a. What are the rates of return of assets A and B at their current prices?

 

Return on asset A = ?

 

Return on asset B = ?

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 Dec 4, 2018
edited by Guest  Dec 4, 2018
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Asset A costs 85   returns 100 in a year for an increase $ 15    15/85= 17.65%  ROR

          B           95                                                                  5       5/95 =  5.26% ROR

 Dec 4, 2018

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