Cash Flow in One Security Market Price Today Weak Economy Strong Economy 140 500 500 Market Index 600 500 1200 Assume both states of the economy are equally likely. a) What is the no-arbitrage price of security B? (1 mark) b) What is the market price of a portfolio consisting of one share of security A and one share of security B? (1 mark) c) What is the risk-free rate of return in this economy? Explain why this is the risk- free return. (2 marks) d) What is the expected return of security B? What is its risk premium? (2 marks)