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Suppose you observe the following situation: Rate of Return if State Occurs State of Economy Bust Normal Boom Probability of State 20 60 20 Stock

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Suppose you observe the following situation: Rate of Return if State Occurs State of Economy Bust Normal Boom Probability of State 20 60 20 Stock A -.06 15 50 Stock B .04 15 30 a. Calculate the expected return on each stock. (Do not round intermediate calculations and enter y answers as a percent rounded to 2 decimal places, e.g., 32.16.) Stock A Stock B Expected return % % b. Assuming the capital asset pricing model holds and stock A's beta is greater than stock B's beta by 4 what is the expected market risk premium? (Do not round intermediate calculations and enter yo answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected market risk premium % Suppose you observe the following situation: Rate of Return if State Occurs State of Economy Bust Normal Boom Probability of State 20 60 20 Stock A -.06 15 50 Stock B .04 15 30 a. Calculate the expected return on each stock. (Do not round intermediate calculations and enter y answers as a percent rounded to 2 decimal places, e.g., 32.16.) Stock A Stock B Expected return % % b. Assuming the capital asset pricing model holds and stock A's beta is greater than stock B's beta by 4 what is the expected market risk premium? (Do not round intermediate calculations and enter yo answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected market risk premium %

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