1. Fallweather Enterprises stock has an expected return of 8.9 percent and a beta of .66. The

market return is 11.4 percent and the risk-free rate is 3.7 percent. The CAPM return for the stock is _____ percent.

a.		8.8%
b.		11.2%
c.		cannot be determined
d.		none

2.Stocks A and B have the same reward-to-risk ratio. If the following info is given for these stocks, what should be the risk free rate?

stock A: E(R) = 10%, beta = 1.2

stock B: E(R) = 15%, beta = 2

		a .2%
		b. 2.5%
		c. 3%
	d.	cannot be determined
		e. none ANSWER BOTH and show work