1. Consider the three state, two security example that we discussed in class. (a) What is the risk-free rate that is implied by the price of security 1 ? (b) What is the expected return of security 2 ? (c) Suppose we introduce Security 3, which pays 0 on both the Recession and Normal states and pays 300 in a boom. Is the market complete? (d) For what values of P3 is there no arbitrage