Use the following data to answer problems 2 through 4 State of Probability of State Stock A S&P500 Economy of Economy Rate of Return Rate of Return _________________________________________________________ Recession 0.25 -0.15 0.02 Normal 0.55 0.18 0.09 Boom 0.20 0.50 0.18 2. Assume that the S&P500 is your market index. a. Calculate the variance for the S&P 500's. b. Calculate the covariance between Stock A and the S&P 500. 3. Finally, suppose that the Beta for stock A is 1.25 (it's not!). Then using the SML calculate the expected rate of return for stock A if the risk-free rate is 3.4 percent and the expected return on the market (S&P500) is 9.05 percent. 4. Given the information in question 3, is Stock A over valued or undervalued. Show this on the SML graph. Be sure to label everything on the grap