4. You have $10,000 to invest and you put $8,000 in stock C and $2,000 in stock D (the two stocks listed in Question 3). What is the beta of your portfolio? What is the expected return rate of your portfolio?

5. You have observed GE stock for a long time. The stock has an expected return of 14% and a beta is 1.2. If risk free rate is 2%, what is the expected return rate from the market portfolio?

6. You also considered Google stock for your investment portfolio. The stock has an expected return of 20% and a beta is 2. If the expected return rate from the market portfolio is 12%, what is the risk free rate in the economy?

1. Definition: (i for every possible scenario)

2. Sharpe Ratio: S= E(r)-rf/ o

3. Coefficient of Variation: CV= / E(r)

4. Portfolio situation. The expected return and standard deviation of return for A and B are and respectively, and w_A w_B are investment weights on asset A and B:

1)Portfolio Expected Return Rate:

2)Portfolio Standard Deviation:

3)Portfolio Beta:

5. Capital Asset Pricing Model (CAPM):

Expected Return: E(r) = rf+risk premium = rf + B [E(rm)-rf]