Question
We know the following expected returns for stock A and the market portfolio, given different states of the economy: State (s) Probability E(r A,s )
We know the following expected returns for stock A and the market portfolio, given different states of the economy:
| State (s) | Probability | E(rA,s) | E(rM,s) |
| Recession | 0.1 | -0.05 | 0.04 |
| Normal | 0.5 | 0.1 | 0.07 |
| Expansion | 0.4 | 0.18 | 0.11 |
The risk-free rate is 0.02.
Assuming the CAPM holds, what is the beta for stock A?
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Foundations Of Financial Management
Authors: Stanley B. Block, Geoffrey A. Hirt, Bartley R. Danielsen
13th Edition
0073382388, 978-0073382388
