What is the beta () of a security of a type S firm whose return increases 42% on average when the economy is strong and declines 18% when the economy is weak, in response to a 30% increase in the market portfolios return when the economy is strong and 10% decline when the economy is weak? The economy is equally likely to be strong or weak. The risk-free rate is 6%.

1. What is the beta () of the security? (2 points)
2. What would be the estimate of the securitys expected return, based on its beta () as a measure of its systematic risk? (2 points)
3. Does the securitys actual expected return equal its estimated expected return in part b? (2 points)