The market prices (in the absence of an arbitrage opportunity) and the future flows of the three risky assets X, Y and Z are:

		Flux in a year
Asset	Market price today	Unfavorable Outcome	Favorable outcome
X	250	0	500
Y	275	500	0
Z	???	500	1500

The two economic conditions are equally likely.

The risk-free interest rate is 4%.

a) What is the non-arbitrage price for asset Z?

b) If the asset's risk premium is 10%, is there an arbitrage opportunity?