1. A firm has a debt-to-equity ratio of .5. Its after-tax cost of debt is 12%. Its overall cost of capital is 14%. What is its cost of equity?

2. Stock A has an expected return of 20% and stock B has an expected return of 4%. However, the risk of stock A as measured by its variance is 3 times that of stock B. If the two stocks are combined equally into a portfolio of the two stocks, what would be the portfolios expected return?