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Memphic Memphic
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6 years ago
If the value of security "C" is $180, then what must be the value of security "A"?
A) $80
B) $90
C) $100
D) Unable to determine without the risk-free rate.
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
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#1
6 years ago
A
Explanation:  A) The cash flows from C are simply a combination of A & B, so price(C) = price(A) + price(B).  Since B is already in todays dollars, price(B) must = 100, so price A = 180 - 100 = $80.
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