The table here shows the no-arbitrage prices of securities A and B that we calculated. Cash Flow

Question:

The table here shows the no-arbitrage prices of securities A and B that we calculated.

Cash Flow in One Year Security Market Price Today Weak Economy Strong Economy Security A 231 0 600 Security B 346 600 0

a. What are the payoffs of a portfolio of one share of security A and one share of security B?

b. What is the market price of this portfolio? What expected return will you earn from holding this portfolio?

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