Business, 22.11.2019 23:31, Maddy4965

Suppose you observe the following situation: state of economy probability of state return if state occurs stock a stock b boom .15 −.11 −.06 normal .70 .16 .15 bust .15 .48 .29
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, e. g., 32.16.)
b. assuming the capital asset pricing model holds and stock a’s beta is greater than stock b’s beta by .32, 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.)

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Suppose you observe the following situation: state of economy probability of state return if state...