1.) You have been provided with the following data on the securities of three firms, the market portfolio and the risk-free asset:

Security		i	iM	i
A	0.13	0.12	X1	0.90
B	0.16	X2	0.40	1.10
C	0.25	0.24	0.75	X3
Market	0.15	0.10	X4	X5
Risk-free asset	0.05	X6	X7	X8

where is the average realized return of asset i in the recent past (equal to its expected return today), _i is the standard deviation of asset i's returns, _iM is the correlation of asset i's returns with the market returns and _i is the beta of asset i. Assume the CAPM holds true.

Fill in the missing values X1,,X8 in the table without using the information on average realized returns.

Provide an evaluation of the investment performance of the three firms and make justified investment recommendations.

2.) The following data have been compiled for a large Fortune 500 company j:

State	Probability	rM	rj
I	0.1	-0.15	-0.30
II	0.2	0.05	0.00
III	0.3	0.15	0.20
IV	0.4	0.20	0.50

where r_M denotes the market return and r_j denotes the return of company js shares. The risk-free rate is 6%.

Calculated the expected market return and variance and the expected return for company j and the covariance of j with the market return.

Write the equation for the SML. What is the required return for company j? Should you buy the shares?

3.) Using data downloaded for Homeworks 2 and 4Download additional monthly closing figures for the S&P 500 Index for the period between December 2010 and December 2015 from Yahoo! (Ticker symbol: ^GSPC)

Compute the companies betas from monthly returns.

How much of each stocks risk is systematic risk?

What is the alpha of each stock and is it statistically significantly different from zero?