1.

Consider the following information:

State of Economy	Probability of State of Economy	Rate of Return if State Occurs
Recession	0.21	-0.04
Normal	0.45	0.16
Boom	0.34	0.23

Required:

Calculate the expected return.

2.

Consider the following information:

		Rate of Return if State Occurs
State of Economy	Probability of State of Economy	Stock A	Stock B
Recession	0.10	0.04	-0.20
Normal	0.60	0.09	0.14
Boom	0.30	0.15	0.33
a) Calculate the expected return for Stock A. (Do not round your intermediate calculations.) b) Calculate the expected return for Stock B. (Do not round your intermediate calculations.) c) Calculate the standard deviation for Stock A. (Do not round your intermediate calculations.) d) Calculate the standard deviation for Stock B. (Do not round your intermediate calculations.)

3.

You own a stock portfolio invested 25 percent in Stock Q, 20 percent in Stock R, 15 percent in Stock S, and 40 percent in Stock T. The betas for these four stocks are 1.41, 1.21, 0.76, and 0.68, respectively. What is the portfolio beta?

4.

A stock has a beta of 1, the expected return on the market is 17 percent, and the risk-free rate is 7.65 percent. What must the expected return on this stock be?

5.

A stock has an expected return of 16 percent, its beta is 0.65, and the risk-free rate is 6.4 percent. What must the expected return on the market be?

6.

A stock has an expected return of 18 percent, its beta is 1.4, and the expected return on the market is 14 percent. What must the risk-free rate be? (Do not round your intermediate calculations.)