1. (10 Pts.) Given the following:

State	Probability	End of Period Return
		Stock A	Stock B
1	0.4	12%	14%
2	0.4	16%	15%
3	0.2	18%	16%

a. What are the expected returns on stocks A and B?

b. What is the expected return of a portfolio of 20% in A and 80% in B?

c. If the Beta of stock A is 0.8 and that of B is 1.3, what is the Beta of a portfolio formed by invested 80% in A and 20% in B?

d. If the risk-free rate is 4% and the expected return on the market is 15%, what is the return on the portfolio from part c?