1- Richard must decide how to allocate the capital in his portfolio.

Richard has

$36,000

available to invest. He finds the rates of

return for four stocks for the past 12 years and the results are given

below. Richard plans to invest 25% of his funds in each stock.

Year	Stock A (%)	Stock B (%)	Stock C (%)	Stock D (%)
1	-6.370	-0.930	2.580	-10.440
2	32.390	8.760	-7.110	47.700
3	26.490	7.285	-5.635	38.850
4	28.490	7.785	-6.135	41.850
5	-18.570	-3.980	5.630	-28.740
6	33.090	8.935	-7.285	48.750
7	71.790	18.610	-16.960	106.800
8	26.930	7.395	-5.745	39.510
9	14.030	4.170	-2.520	20.160
10	34.390	9.260	-7.610	50.700
11	-10.450	-1.950	3.600	-16.560
12	-2.570	0.020	1.630	-4.740

a) How much will he invest in each stock?$

b) The expected value of Richard's portfolio is: %

c) The standard deviation of Richard's portfolio is:%

2- Anna is a Vice President at the J Corporation. The company is considering
investing in a new factory and Anna must decide whether it is a feasible
project. In order to assess the viability of the project, Anna must first calculate
the rate of return that equity holders expect from the company stock. The
annual returns for J Corp. and for a market index are given below. Currently,
the risk-free rate of return is 1.8% and the market risk-premium is 7.4%.

a) What is the beta of J Corp.'s stock? 2 decimal places

b) Using the CAPM model, what is the expected rate of return on J Corp. stock for the coming year?

(Round your answer to one one-hundreth of a percent)

Year	J Corp. Return (%)	Market Return (%)
1	-1.83	-3.60
2	12.71	15.78
3	10.49	12.83
4	11.24	13.83
5	-6.41	-9.70
6	12.97	16.13
7	27.48	35.48
8	10.66	13.05
9	5.82	6.60
10	13.46	16.78
11	-3.36	-5.64
12	-0.40	-1.70

Refer to Questions 1 and 2. Richard has just received an unexpected

bonus at work worth

$9,000

and, given the J. Corp.'s reputation

for excellent investment decision making, he will invest all of the bonus

in J Corp. stock. Given the rates of return for stocks A, B, C, and D

presented in Question 1 and the rates of return for J Corp. stock and

the market presented in Question 2, as well as the cash amounts he

is investing in stocks A, B, C, and D as you determined in Question 1,

a) What is the beta of Richard's portfolio?

b) Richard's portfolio is