Consider the following two economic scenarios. The table provides the expected returns for the market portfolio (S&P 500), Boeing and Conagra Brands stocks under each scenario.

Rate of Return

Scenario

Market (S&P500)

Boeing

Conagra Brands

Recession

–6

%

–12

%

–4

%

Boom

15

36

10

Required:
a. Find the beta of Boeing and Conagra Brands.
b. Calculate the expected rate of return on the market portfolio, Boeing and Conagra Brands separately, assuming that each scenario is equally likely.
c. Calculate the fair expected rate of return that CAPM suggests for Boeing and Conagra Brands. Assume a risk-free rate of 5%.
d. Based on your responses to (a) through (c), which stock appears to be a better buy?