Analysts have made the following predictions over the next 6 months. + Economic Outlook Probability Stock 1 return Stock 2 return Positive 25% 18% Stable 55% 7% Negative 20% -12% 23% 5% -16% (i) If 2 is greater than 1 by 0.3 and the CAPM holds, what is the market risk premium?+ (ii) If 11.5, find the risk-free rate and the expected return of the market. (iii) after 6 months, the Central Bank cuts interest rates to 3% and the analysts update their forecasts as follows. < Economic Outlook Probability Stock 1 return Stock 2 return Market Positive 35% 14% 38% 12% Stable 55% 21% 11% 6% Negative 15% -5% -32% -5% In terms of diversifiable and non-diversifiable risk, which stock is now riskier and why? Which stock would you select