1. Your entire stock portfolio contains shares of AMC (24%), Bayer (50%), and CarGurus. Using the information in the table below, the variance of your portfolio is ___________.

State of Economy	Probability of State			Return if State Occurs
	of Economy			AMC			Bayer			CarGurus
Recession		.117			10.40%			3.80%			12.80%
Normal		.671			9.70%			10.72%			17.20%
Boom		.212			21.61%			25.23%			29.93%

• .00884

• .00783

• .00951

• .00842

• .01137

2. According to the Bloomberg Network (a Financial TV channel), the current return on the U.S T-bill is 3.3% and the market risk premium is 7.8%. Given this news, in the table below, the only stock that is correctly priced is:

Stock	Beta			Expected Return
A		.83			10.10	%
B		1.49			12.53
C		1.30			11.24
D		1.50			15.00
E		.95			8.65

• Stock C

• Stock B

• Stock D

• Stock E

• Stock A