1. The risk-free rate is 3% and the expected return on the market is 10%. Suppose Amazon.com has a beta of 2.3, what is the required return for Amazon.com? What is the market risk premium?

2. The risk-free rate is 3% and the market risk premium is 7%. What is the required rate of return on the market? If Reno Mining Co. has a beta of -.50, what is the required return for Reno? Why would anyone want to invest in Reno?

3. Combine Amazon.com and Reno in a portfolio, with half of your money in each. What is the beta of the portfolio? What is the required return on the portfolio? How does this portfolio compare to an investment in Amazon, in terms of required return and risk?

4. The required return for Compaq computer is 15.2% and its beta is 1.6. The market return is 10%. What is the risk-free rate? What is the market risk premium? What is the risk premium for Compaq?