Firm X and Y each have a beta of 1.5 and 2.5. If their expected return (cost of equity) are each estimated to be 7% and 10% under CAPM, what is the assumed expected market return and risk-free rate?

Here are the probability distributions for three investment project returns: | Up (prob = 0.4) Down (prob = 0.6) 5% -2% -2.5% 3% 14% -8% X