1.) The expected return of a stock is equal to

a. the risk-free rate of interest plus the beta times the market rate of return.

b. the expected percentage capital gains from the stock.

c. the risk-free rate plus the stock's risk premium.

d. expected capital gains plus forward dividends as a percent of the current market price.

2.) An investor plans to invest 75 percent of her funds in the common stock of Gamma Industries and 25 percent in Epsilon Company. The expected return on Gamma is 12 percent and the expected return on Epsilon is 16 percent. The standard deviation of returns for Gamma is 8 percent and for Epsilon is 12 percent. The expected return on the investor's portfolio is

a. 15%

b. 9%

c. 10%

d. 13%

3. All of the following are primary sources of systematic risk of a stock of a firm except

a. consumer lawsuits against a company.

b. changes in monetary policy.

c. interest rate changes.

d. changes in economic growth.