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State of the economy Probability stock A stock B Bust 0.20 -0.35 -0.06 Normal 0.55 0.14 0.35 Boom 0.25 0.32 0.20 Assuming the capital asset

State of the economy Probability stock A stock B
Bust 0.20 -0.35 -0.06
Normal 0.55 0.14 0.35
Boom 0.25 0.32 0.20

Assuming the capital asset pricing model holds and stock As beta is greater than stock Bs beta by 12%, what is the expected market risk premium? (%)

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