3. There are two possible states of the economy, good and bad, each with 50% probability. If the economy is good, the market return is 40%, the return on Stock A is 52% and the return on Stock B is 32%. If the economy is bad, the market return is -10%, the return on Stock A is -13% and the return on Stock B is -8%.
   1. What is the beta of each stock?
   2. If the risk-free rate = 5%, which stock should you buy?