Suppose you have the following economy where the two states are equally likely: Market Price Cash flow in One Year Security Today Poor Economy Good Economy A 225 420 0 B 175 0 420 C ??? 420 840 a) What should be the price of C (i.e. the price that allows no arbitrage opportunity)? b) If the price of security C is $400, is there an arbitrage opportunity? How would you seek to profit from this? c) Using the correct price of C from part (a), what is the expected return on security C? d) If the risk-free rate is 5%, is the risk premium on C negative or positive? Can you explain this? e) Which security do you think is riskier: C or B? Why?