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I only need the answer for question 10 Question 9: Suppose the economy can be in one of the following three states: (1) Boom or

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I only need the answer for question 10

Question 9: Suppose the economy can be in one of the following three states: (1) Boom or good state and (ii) Normal State and (iii) Recession or "bad" state. The probability of states occurring is 20%, 55%, and 25% respectively. The annual return on the market and a certain security X in the three states of the economy are as follows. Furthermore, assume that annual risk-free rate of return is 6% in all states of the market. Calculate the beta of security X relative to the market. State of Economy Probability of state Market return StockX return 0.24 Boom 0.20 0.36 Normal 0.55 0.17 Bust 0.25 0.00 -0.28 A. 1.7 B. 2.3 C. 2.6 D. 2.9 Question 10: In the above question (Question 9), assuming CAPM is the correct model to price securities in the market, which of the following statements is true: A. The security is over-priced. B. The security is under-priced. C. The security is fairly priced. D. Insufficient Information

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