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Given the following situation: State Probability of state Return Stock A Return Stock B Boom .20 .50 .25 Normal .65 120 .12 Bust .15 .05

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Given the following situation: State Probability of state Return Stock A Return Stock B Boom .20 .50 .25 Normal .65 120 .12 Bust .15 .05 -.02 BETA: Stock A has a Beta that is 0.32 greater than stock B Complete the following: REQUIRED 1: Calculate the expected return on each stock. REQUIRED 2: Assuming that the capital asset pricing model holds, what is the expected market risk premium

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