A share of a mutal fund that matches the returns of the market portfolio is priced at $100. Suppse the fund is equally likely to increase to $135 in a year, or decrease to $85 in a year. A bond selling for $1000 will pay a sure $1050 in a year.

a. What is the no-arbitrage value of a project that loses off $6,000 when the market portfolio increases, and pays off $25,000 when the market portfolio decreases?

b. What is the expected return on the project?

c. Does it make sense that anyone would invest the project, given its expected return? Explain.