1.Stock X, Stock Y, and the market have had the following returns over the past four years.

Year

Market

X

Y

1999

11%

10%

12%

2000

7%

4%

-3%

2001

17%

12%

21%

2002

-3%

-2%

-5%

The risk-free rate is 7 percent. The market risk premium is 5 percent. What is the required rate of return for a portfolio that consists of $14,000 invested in Stock X and $6,000 invested in Stock Y rates of return?

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