1. The common stock of Middlemass, Inc. is expected to return 17 percent in a boom economy and 14 percent in a normal economy. The probability of a boom is 75 percent and the probability of a normal economy is 25 percent. What is the expected rate of return on this stock?

2. A portfolio is made up of Stock A, stock B and a t-bill. Stock A is equally as risky as the S&P500 and stock B has a beta of 2.0. What is the portfolio beta if it contains stock A, stock B and t-bills? (Please assume equal weights for each item in the portfolio.)

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