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Consider the following information on Stocks I and II. The market risk premium is 8 percent, and the risk- free rate is 3.6 percent. Find

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Consider the following information on Stocks I and II. The market risk premium is 8 percent, and the risk- free rate is 3.6 percent. Find betas of stock I and stock II. State of Economy Probability of State of Economy Rate of Return if State Occurs Stock ! Stock 11 Recession 0.06 0.15 -0.35 Normal 0.69 0.35 0.35 Irrational exuberance 0.25 0.43 0.45

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