1

Your retirement fund consists of a $5,000 investment in each of 15 different common stocks. The portfolio's beta is 1.50. Suppose you sell one of the stocks with a beta of 0.9 for $5,000 and use the proceeds to buy another stock whose beta is 2.0. Calculate your portfolio's new beta. Do not round intermediate calculations. Round your answer to two decimal places.

2,

The market and Stock J have the following probability distributions:

Probability	rM		rJ
0.3	13	%	20	%
0.4	10		6
0.3	19		10

1. Calculate the expected rates of return for the market and Stock J. Round your answers to one decimal place.

   Expected rate of return (Market): %

   Expected rate of return (Stock J): %

2. Calculate the standard deviations for the market and Stock J. Do not round intermediate calculations. Round your answers to two decimal places.

   Standard deviation (Market): %

   Standard deviation (Stock J): %

3.

Suppose r_RF = 6%, r_M = 11%, and r_A = 14%.

1. Calculate Stock A's beta. Round your answer to one decimal place.

2. If Stock A's beta were 1.9, then what would be A's new required rate of return? Round your answer to one decimal place.

   %