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You are a financial analyst and you try to value an asset A (i.e. find its market price). That asset generates a single cash-flow in

You are a financial analyst and you try to value an asset A (i.e. find its market price). That asset generates a single cash-flow in one year, which depends on the state of the economy.

The risk-free rate is 3.5%. is the annual returns on the market portfolio depending on the state of the economy. Let denote the value (or price) of project A and its exposure to systematic risk. image text in transcribed

Using information in the table above, write the expected return on A as a function of .

T. State Depression Normal Boom Probability 0.3 0.5 0.2 CF from A $150,000 $100,000 $90,000 -1% 9% 15%

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