ABSTRACT
There are two stocks, traded over two periods. The dividends paid by these stocks at the end of period 1 and the values of the stocks at the end of period 2 depend on what happens to each firm’s local economy in general and to each firm in particular. The interest rate each period is set at 0%, so the time value of money plays no role in this case. You can borrow at this rate and also short sell the stocks.
