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2. Historical rates of return for the market and for Stock A are given below: State of Nature Market Stock A Good Market 20.00% 8.00%

2. Historical rates of return for the market and for Stock A are given below:

State of Nature Market Stock A
Good Market 20.00% 8.00%
Bad Market -1% 3%

2. Assume these are the only two states of nature that can occur, and that there is a 50% chance of either state of naturally occurring. If the risk-free rate is 6 percent, what is the required return on Stock A, according to CAPM/SML theory?

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