University of California ClassWork 2 Suppose you observe the following situation: Rate of Return If State Occurs State of Probability of Economy State Stock A Stock B Bust .35 −.11 −.09 Normal .40 .10...

University of California ClassWork 2

Suppose you observe the following situation:

Calculate the expected return on each stock.(Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Assuming the capital asset pricing model holds and Stock A's beta is greater than Stock B's beta by .65, what is the expected market risk premium?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)