1: If a project's expected return is 13.70%, which represents a 28.50% return in a booming economy and a 5.70% return in a stagnant economy, what is the probability of a stagnant economy?

a. 64.91% b. 55.48% c. 41.61% d. 20.00% e. 48.07%

2: The common stock of Alibaba Group has a beta of 0.75 and an expected rate of return of 14.60%. Investors expect the return on the market portfolio this year to be 17.50%. Assuming that the risk-free rate does not change, what would be your expected return on Alibaba stock if the market portfolio return is 24.30%?

a. 13.18% b. 19.70% c. 25.61% d. 15.15% e. 17.91%

3: KLN stock has a beta of 1.90. The expected annual dividend per share for the coming year is $3.40. The dividend is expected to grow indefinitely at an annual rate of 5.50%. The market risk premium is 10.10%. If the risk-free rate is 2.00%, then what should be the price of KLN stock?

a. $21.67 b. $28.60 c. $17.06 d. $38.78 e. $32.31

4: The expected rate of return on AAA Company is 18.50% and its standard deviation is 28.00%. The expected rate of return on BBX Company is 9.30% and its standard deviation is 11.80%. The correlation coefficient for the two stocks is 0.83. Calculate the standard deviation of a portfolio that is 68% invested in AAA and the remainder in BBX.

a. 38.36% b. 16.59% c. 19.41% d. 22.27% e. 43.35%