1. Consider the following information: Rate of Return if State Occurs State of Probability of State of Stock A Stock B 60 .09 12 Boom a. Calculate the expected return for Stocks A and B b. Calculate the standard deviation for Stocks A and B 2. Suppose you observe the following situation: Rate of Return If State Occurs State of Probability of Economy State of Economy Boom Bust Stock C Stock A 09 Stock B 17 -.05 60 40 -.08 a. What is the expected return on an equally weighted portfolio of these three stocks? b. What is the variance of a portfolio invested 25 percent each in A and B and 50 percent in C? 3. Suppose you observe the following situation: Beta Expected Return ABC Corp. XYZ Corp. 0.82 1123 1.27 1567 a. Assume these securities are correctly priced. Based on the CAPMwhat is the expected return on the market? b. What is the risk-free rate