1.The risk-free rate is 6% and the expected rate of return on the market portfolio is 11%.

a.

Calculate the required rate of return on a security with a beta of 1.75.(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

2.

Stock A has a beta of .5, and investors expect it to return 7%. Stock B has a beta of 1.5, and investors expect it to return 13%. Use the CAPM to calculate the market risk premium and the expected rate of return on the market.(Do not round intermediate calculations. Enter your answers as a whole percent.)

Market risk Premium % ______

Expected Market rate of return %_______

3.If the expected rate of return on the market portfolio is 14% and T-bills yield 7%, what must be the beta of a stock that investors expect to return 12%? (round to 4 decimal places)

Beta of Stock _______

4.

A mutual fund manager expects her portfolio to earn a rate of return of 10% this year. The beta of her portfolio is .7. The rate of return available on risk-free assets is 4% and you expect the rate of return on the market portfolio to be 14%.

What expected rate of return would you demand before you would be willing to invest in this mutual fund?(Do not round intermediate calculations. Enter your answer as a whole percent.)

Expected rate of return % _______