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 | 0.2 | -0.02 | 0.02 |
| Normal | 0.5 | 0.13 | 0.05 |
| Expansion | 0.3 | 0.21 | 0.09 |
The risk-free rate is 0.02.
Assuming the CAPM holds, what is the beta for stock A?
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Financial Markets And Institutions A Modern Perspective
Authors: Anthony Saunders, Marcia Millon Cornett, Marcia Cornett
2nd Edition
007294109X, 978-0072941098
