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State of Economy Probability of State of Economy Rate of Return if State Occurs Stock I Stock II Recession 0.20 0.05 -0.35 Normal 0.45 0.35

State of Economy Probability of State of Economy Rate of Return if State Occurs Stock I Stock II Recession 0.20 0.05 -0.35 Normal 0.45 0.35 0.35 Irrational exuberance 0.35 0.23 0.25 The market risk premium is 8 percent, and the risk-free rate is 3.6 percent. The beta of stock I is _____ and the beta of stock II is _____

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