Question: We know the following expected returns for stocks A and B, given different states of the economy: State (s) Probability E(r A,s ) E(r B,s

We know the following expected returns for stocks A and B, given different states of the economy:

State (s) Probability E(rA,s) E(rB,s)
Recession 0.1 -0.02 0.03
Normal 0.5 0.13 0.06
Expansion 0.4 0.21 0.1

The required return on the market portfolio is 0.06 and the risk-free rate is 0.02.

Part 3

What is the beta for stock A?

Part 4

What is the beta for stock B?

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