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Suppose security C has a payoff of $700 when the economy is weak and $1400 when the economy is strong. The risk-free interest rate is

Suppose security C has a payoff of $700 when the economy is weak and $1400 when the economy is strong. The risk-free interest rate is 4%.

1.What is the no-arbitrage price of security C?

2.What is the expected return of security C if both states are equally likely? What is its risk premium?

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