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 = ?
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