# Cfa question , derivatives level 1

In a complete and efficient market, you have two assets, a treasury bill (risk-free) with a 2% discount rate that expires in one year and an asset whose expected value in one year is 1,400 if the economy grows and \$ 700 if the economy falls. If the price of this last asset is 1000, what should be the price of an asset that in a year will pay a dollar only if the economy grows (it will pay 0 if the economy falls).

a) 0.7

b)0.45

c) 0.5

i kown what your thinking, use( (1+r) -D)//U-D) then compute the average like its a call tree. I did it but I had no answer. Greetings friend! It seems here that they are asking you to calculate the probability based on the 300 premium above 700, versus the 700 spread between 700 and 1400… then adding the risk free rate. Seems like answer B is correct unless I’m mistaken - what does your problem’s answer say?

In the future please also post your problem answers so we can check their logic… it’s much faster to analyze and assess the problem in that way. Cheers - good luck - you got this 