1) You believe that next year there is a 25% probability of a recession and 75% probability that the economy will be normal. If your stock will yield -11% in a recession and 22% in a normal year, what is the standard deviation of the stock? Round to two decimals.

2) You hold a portfolio composed of 20% security A and 80% security B. If A has an expected return of 10% and B has an expected return of 15%, what is the expected return from your portfolio? Round to two decimals.

3) Suppose you purchased 1,700 shares of Pan Am Airlines at the beginning of the year for $21.55. By the end of the year, the stock price had appreciated to 23.42. At the end of the year, Pan Am paid a dividend of $1.15 per share. Calculate the dividend yield on this investment over the year. Round to two decimals.

4) You bought stock in your favorite online retail company at a price of $70 per share. You recently sold the stock for a price of $78 per share. While holding the stock, you received dividends of $1.50. What was your holding period return? Round to two decimals.

5) If Microsoft stockholders expect either a 24.5% return or a 1.9% return, each with a 50% probability, and Apple Computer shareholders expect a 10.2% return with certainty, what is the expected return from a portfolio comprised of equal amounts of stock from both firms.

6) If the probability of a 20% return is 70% and the probability of a 3% loss is 30%, what is the expected return? a) 10% b) 15% c) 13% d) 17% e) 12%

7)

Compute the expected return for the following portfolio. No. of Shares in Portfolio 38 98 96 Price per Share ($) 49.00 20.00 12.00 Expected Return on Security (%) 27 Securityin Portfolio 14 The expected return on the portfolio is %. (Round to two decimal places.)