Calculate the following questions Show all work and assumptions State of Economy Probability of state Returns if state occurs ( ) BA BB BC Recession 0 10 5 5 7 5 Normal 0 70 15 12 15 Boom 0 20 40 28 26 Based on the expected return of the portfolio in (ii), what is the risk free interest rate, if the expected market return is 14 and the portfolio beta is 1 2

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Calculate the following questions. Show all work and assumptions State of Economy Probability of state Returns if state occurs (%) BA BB BC Recession 0.10

Calculate the following questions. Show all work and assumptions

State of Economy	Probability of state	Returns if state occurs (%)
		BA	BB	BC
Recession	0.10	-5	-5	-7.5
Normal	0.70	+15	+12	+15
Boom	0.20	+40	+28	+26

Based on the expected return of the portfolio in (ii), what is the risk-free interest rate, if the expected market return is 14% and the portfolio beta is 1.2.

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