1.If I had a stock with a beta of 1.25 and I thought the stock market was going to climb by 10% over the next 2 months, how much should I expect my stock to move? How about if I thought the stock market was going to drop by 5%? What would happen under each of the previous two cases if my beta was 0.6 instead of 1.25?

2.Due to a recent news announcement, the expected return on XYZ Corp. just went from 13% to 18%. Assuming that the stock was in equilibrium prior to the announcement and the announcement did not affect the required return, explain what will happen to XYZs stock price (and expected return) in the immediate future to bring the stock back into equilibrium. How long should this process take?