does it look correct
29. Suppose you observe the following

situation:

a.        Calculate the expected return on each stock.

           0.10(-0.12) + 0.65(0.09) + 0.25(0.35)

           = 0.134

           0.10(-0.05) + 0.65(0.10) + 0.25(0.21)

           = 0.1125

b.        Assuming the capital asset pricing model holds and stock A’s beta is greater than stock B’s beta by .25, what is the expected market risk premium?

           (0.134 – 0.1125) / 0.25

           0.086

           = 8.6%

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