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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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