Q$1.$

$\backslash$table$[[$Security$,$Market Price Today,Cash Flow in One Year$],[,$Weak Economy,Strong Economy$],[$A$,231,0,600],[$B$,346,600,0],[$C$,?,600,1800]]$

a$)$ What are the payofis of a portiolio of one share of security A and one share of security B$?$

b$)$ What is the market price of this portfolio? What expected retum will you cam from holding this portfolio?

c$)$ What is the no$-$atbitrage price of security C$?$

d$)$ What is the expected retum of security Cif both states are equally fikely? What is its riak premium?

What are the returns when the market is strong and when the market is weak?

if Suppose your subordinate told you that the risk premium for $C$ should be $10\%.$ What would be the price of C given that risk premium? Is your subordinate correct?