Young Corporation is considering the following investments. The current rate on Treasury Bills is 2.5% and the expected return for the market is 9%.

Stock	beta
K	1.12
G	1.3
B	0.75
u	1.02

a) Using the CAPM, what rate of return should Young Corporation require for each individual security?

b)How would your evaluation of the expected rates of return for Young Corporation change if the risk-free rate was to rise to 4.5% and the market risk premium was to be only 5%?

c) Which market risk premium scenario (from [a] or [b] above) best fits a recessionary environment? A period of economic expansion? Explain your response using a graph which plots the expected return (y-axis) and the beta (x-axis).