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Suppose the market portfolio is equally likely to increase by 35% or decrease by 5%. Also suppose that the risk-free interest rate is 5% a. Use the bota of a firm that goes up on average by 50% when the market goes up and goes down by 10% when the market goes down to estimate the expected return of its stock. How does this compare with the stock's actual expected return? b. Use the beta of a firm that goes up on average by 15% when the market goes down and goes down by 17% when the market goes up to estimate the expected return of its stock. How does this compare with the stock's actual expected retur? a. Use the beta ol a firm that goes up on average by 50% when the market goes up and goes down by 10% when the market goes down to estimate the expected return of its stock. How does this compare with the stock's actual expected retur? The bota of the stock is (Round to two decimal places) The expected retum of the market is % (Round to two decimal places) According to the CAPM, the expected return of the stock should be % (Round to two decimal places.) Does the CAPM hold in this case? (Select from the drop-down menu.) b. Use the beta of a firm that goes up on averago by 15% when the market goes down and goes down by 17% when the market goes up to estimate the expected return of its stock. How does this compare with the stock's actual expected return? The beta of the stock is (Round to two decimal places) The expected retum of the stock is (Round to two decimal pill, ens.) Does the CAPM hold in this case? (Select from the drop-down menu.)

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