1. Given the following information, what is the standard deviation of stock A if it has an expected return of 25% in a boom economy, an expected return of 10% in a good economy, and an expected return of 2% in a recession? The probabilities of boom, normal, recession are 0.2, 0.6, and 0.2, respectively.

2. Watson's Automotive has a $375,000 bond issue outstanding that is selling at 75 percent of face value. Watson's also has 21,000 shares of common stock outstanding with a market price of $21 a share. What is the weight of the debt as it relates to the firm's weighted average cost of capital?

3. Ernst's Electrical has a bond issue outstanding with ten years to maturity. These bonds have a $1,000 face value, a 5 percent coupon, and pay interest annually. The bonds are currently quoted at 110 percent of face value. What is Ernst's pre-tax cost of debt?

4. A firm's stock has a required return of 10%. The stock's dividend yield is 2.5%. What is the dividend the firm is expected to pay over a one year period if the current stock price is $80?

5. Your portfolio consists of two stocks. You have $2000 in stock A and $8000 in stock B. The returns for stock A have a standard deviation of 20% and the returns for stock B have a standard deviation of 10%. The correlation coefficient between A and B is 0.1. What is your portfolio standard deviation?