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Below is the returns of the market portfolio and stock A in the 2 possible scenarios....

Below is the returns of the market portfolio and stock A in the 2 possible scenarios. The probability of the boom scenario and the recession scenario are both 50%. Please estimate the beta coefficient for stock A. (Show all work)

Market Portfolio

 Stock A
Boom 25% 20%
Recession -10% -8%

Continuing the previous question. The risk-free interest rate is 2%. According to the beta you estimated in the last question, what is the expected return for stock A according to CAPM?

Use the probability-weighted average market return for CAPM.

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