1. What must be the beta of a portfolio with E(r_P) = 15.40%, if r_f = 4% and E(r_M) = 10%? (Round your answer to 2 decimal places.)

Beta of portfolio

2. The market price of a security is $48. Its expected rate of return is 12%. The risk-free rate is 4%, and the market risk premium is 10%. What will the market price of the security be if its beta doubles (and all other variables remain unchanged)? Assume the stock is expected to pay a constant dividend in perpetuity. (Round your answer to 2 decimal places.)

Market price $

3. You are a consultant to a large manufacturing corporation considering a project with the following net after-tax cash flows (in millions of dollars):

Years from Now	After-Tax CF
0	24
19	10
10	20

The project's beta is 1.8. Assuming r_f = 4% and E(r_M) = 14%

a. What is the net present value of the project? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Net present value million

b. What is the highest possible beta estimate for the project before its NPV becomes negative? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Highest possible beta value

4.Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns:

Market Return	Aggressive Stock	Defensive Stock
7%	2.7%	4.5%
14	29	10

a. What are the betas of the two stocks? (Round your answers to 2 decimal places.)

Beta A
Beta D

b. What is the expected rate of return on each stock if the market return is equally likely to be 7% or 14%? (Round your answers to 2 decimal places.)

Rate of return on A	%
Rate of return on D	%

c. If the T-bill rate is 8%, and the market return is equally likely to be 7% or 14%, what are the alphas of the two stocks? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Alpha A	%
Alpha D	%