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4. Consider the following table of expected returns for 2 assets: state TM recession .05 -.02 .06 (2) boom .25 .38 .12 (a) Find S,

4. Consider the following table of expected returns for 2 assets: state TM recession .05 -.02 .06 (2) boom .25 .38 .12 (a) Find S, and B2. (b) If each state has probability of .5, find E (r ) and E (r2) . (c) Assume that my = .06. Find the equation of the the securities market line. Draw the SML with B on the horizontal axis. Identify each stock. 2

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