1.Portfolio Expected Return: You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 15 percent and Stock Y with an expected return of 9 percent. If your goal is to create a portfolio with an expected return of 13.30 percent, how much money will you invest in stock X? stock Y?

2.Calculating returns and standard deviations: Based on the following information, calculate the expected return and standard deviation for the two stocks.

State of economy	Probability of state economy	Rate of Return if state occurs Stock A	Rate of Return if state occurs Stock B
Recession	.30	.02	-.20
Normal	.55	.08	.13
Boom	.30	.13	.33

3.Returns and standard deviations: Consider the following:

State of economy	Probability of state economy	Rate of Return if state occurs Stock A	Rate of Return if state occurs Stock B	Rate of Return if state occurs Stock C
Recession	.20	.30	.45	.33
Good	.40	.12	.10	.15
Poor	.30	.01	-.15	-.05
Bust	.10	-.20	-.30	-.09

1. Your portfolio is invested 40 percent each in A and C and 20 percent in B. what is the expected rate of return of the portfolio?
2. What is the variance of this portfolio? The standard Deviation?

4.Using CAPM: A stock has a beta of 1.3 and an expected return of 15 percent. A risk free asset currently earns 5.5 percent.

1. What is the expected return on a portfolio that is equally invested in the two assets?
2. If a portfolio of the two assets has a beta of .8, what are the portfolio weights?
3. If a portfolio of the two assets has an expected return of 12 percent, what is its beta?
4. If a portfolio of the two assets has a beta of 2.60, what are the portfolio weights? How do you interpret the weights for the two assets in this case? explain