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Suppose you observe the following situation: Probability of State 15 70 15 State of Retum...

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Suppose you observe the following situation: Probability of State 15 70 15 State of Retum i State tock Bcom Normal Bust 05 14 a. Calculate the expected return on each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, .g, 32.16) Expected return Stock A Stock B b. Assuning the capital asset pricing model holds and Stock A's beta is greater than Stock B's beta by 25, what is the expected market risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g, 32.16.) Market risk premium References eBook & Resources

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