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Suppose you observe the following situation: Probability of Rate of Return If State Occurs Economy State of Economy Stock A Stock B Boom .189 .097

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Suppose you observe the following situation: Probability of Rate of Return If State Occurs Economy State of Economy Stock A Stock B Boom .189 .097 State of Normal Bust .21 .74 .05 .158 -.224 .076 .042 Assume the capital asset pricing model holds and Stock A's beta is greater than Stock B's beta by .84. What is the expected market risk premium? A. 7.81 percent B. 9.05 percent C. 7.94 percent D. 10.06 percent E. 8.28 percent M Reset Selection

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