1. you own $1000 of city steal stock that has a beta of 1. you also own $3000 of rent N co (beta=1.5) and $6000 of Lincoln corporation (beta =2). what is the beta of your portfolio?

2. a manager believes his firm will earn a 12 percent rerurn next year..his firm has a beta of 1.6 the expected return on the market is 11 percent,and the risk is 3 percent. compute the return the firm should earn given its level of risk and determine whether the manager is saying the firm is undervalued or overvalued.

a. 15.8 percent undervalued

b. 15.8 percent overvalued

c. 25.4 percent overvalued

d. 25.4 percent undervalued

3. you have a portfolio with a beta of 1.25. what will be the new portfolio beta if you keep 60 percent of your money in the old portfolio and 40 percent in stock with beta of 0.8?