b) Consider the following information about Asset A and Asset B: State of Economy Probability of State of Economy (Pri)

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B Consider The Following Information About Asset A And Asset B State Of Economy Probability Of State Of Economy Pri 1 (39.53 KiB) Viewed 34 times

b) Consider the following information about Asset A and Asset B: State of Economy Probability of State of Economy (Pri) Bust Normal Boom 15% 70% 15% Rate of Return (j) Asset A Asset B -8% -5% 13% 14% 48% 29% For each asset, compute i. i the expected rate of return. (6 marks) i the standard deviation of the expected retum. (6 marks) ii. If the market risk premium is 8%, the risk free rate is 4%, compute the Beta (B) for each asset using capital asset pricing model (CAPM) formula and identify which one has the most systematic risk and riskier asset. (6 marks)