Rate of Return if State Occurs State of Probability Stock A Stock B Economy of State Recession 0.30 -0.08 -0.08 Normal ? 0.16 0.18 Irrational exuberance 0.20 0.40 0.25 Required: 1. Assuming the capital asset pricing model holds, and the sum of stock A's and B's betas equals 2.2. What is the expected market risk premium if the risk-free rate is 1.6%? 2.) Assume another stock named stock C exists. Using the following relationship between the betas of stocks A, B, and C, calculate the expected return (29A +33) on Stock C. Bc 5