Beta Calculations. Michael Margolis is a single parent and motivational training consultant from Palatine, Illinois.

He is wondering about potential returns on investments given certain amounts of risk. Michael invested a total of $6,000 in three stocks ($2,000 in each) with different betas:

stock A with a beta of 0.8, stock B with a beta of 1.7, and stock C with a beta of 2.5.

(a) If the stock market rises 7 percent over the next year, what will be the likely value of each investment?

(b) If the stock market declines 8 percent over the next year, what will be the likely value of each of Michael’s investments?AppendixLO1