Question: a)If a project's expected return is 13.60%, which represents a 29.70% return in a booming economy and a 5.90% return in a stagnant economy, what

a)If a project's expected return is 13.60%, which represents a 29.70% return in a booming economy and a

5.90% return in a stagnant economy, what is the probability of a stagnant economy?

O a. 45.79%

O b. 43.38%

O c. 19.87%

O d. 67.65%

O e. 57.82%

b) An investor was expecting an 18.60% return on his portfolio with beta of 1.20 before the market risk

premium increased from 6.70% to 13.90%. Based on this change, what return will now be expected on the

. 10.56%

O b. 27.24%

O c. 35.28%

O d. 16.68%

. 28.58%

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