Assume that there is a $34\%$ chance that the market return next year will be $12\mathrm{.}00\%.$

The market can also return $-1\mathrm{.}00\%$ or $4\mathrm{.}50\%,$ both of which are equally likely $($i$.$e$.,$ the

probability of either outcome is $[1-34\%]/2).$ Assume the risk$-$free rate is $2\mathrm{.}00\%.$ If a

firm's beta is $0\mathrm{.}70,$ what is its expected return on equity next year?