Assume we are at t=0, and we expect that at t=1 the economy has a 50% probability to be strong and 50% probability to be weak.

There are two securities traded in the market: A and B. Security As market price at t=0 is $240, and it pays $600 at t=1 if the economy is week, if the economy is strong . It should be Security Bs market price at t=0 is $340, and it pays $600 at t=1 if the economy is weak.

1. What is the rate of return for security C?
2. Security D pays $1800 at t=1 when the economy is weak or $600 if the economy is strong. What is the no-arbitrage price of security D?
3. What is the rate of return for security D?