1. Suppose the market portfolio and stock A have the following probability distribution State Expansion 1 Above normal Normal Recession Probability 0.25 0.25 0.25 0.25 Stock A 50% 0% 10% (-20%) Market 20% 15% 0% (-10%) A. (10 points) Calculate the beta of stock A. B. (10 marks) What is the idiosyncratic risk (in %) of Stock A? C. (5 points) If you were to run a regression where the dependent variable is the excess return of the stock (its return minus the risk free return) and the independent variable is the excess return of the market portfolio, what is your estimate of the R squared of this regression? 1. Suppose the market portfolio and stock A have the following probability distribution State Expansion 1 Above normal Normal Recession Probability 0.25 0.25 0.25 0.25 Stock A 50% 0% 10% (-20%) Market 20% 15% 0% (-10%) A. (10 points) Calculate the beta of stock A. B. (10 marks) What is the idiosyncratic risk (in %) of Stock A? C. (5 points) If you were to run a regression where the dependent variable is the excess return of the stock (its return minus the risk free return) and the independent variable is the excess return of the market portfolio, what is your estimate of the R squared of this regression