The table below shows the no-arbitrage prices of securities A and B and the cash flows for security C under both scenarios the weak economy and the strong economy scenarios. The risk-free interest rate is 3.8 %

		Cash Flow in One Year
Security	Market Price Today	Weak Economy	Strong Economy
Security A	$ 239	$ 14	$ 608
Security B	$ 343	$ 608	$ 14
Security C		$ 650	$1,838

a. Security C has the same payoffs as what portfolio of the securities A and B?

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

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

d. What is the difference between the return of security C when the economy is strong and when it is weak?

e. If security C had a risk premium of 10.4 % what arbitrage opportunity would be available?