8-1. Expected Return A stock's returns have the following distribution: Easy Problems 1-5 Rate of Return in This State 50% State of Economy Boom Above normal Normal Below normal Recession Probability of Being in This State 0.1 0.2 0.3 0.3 0.1 30 15 (5) (40) 1.0 Calculate the stock's expected retum, standard deviation, and coefficient of variation 8-2. Portfolio Beta An individual has $35,000 invested in a stock with a beta of 0.8 and another $40,000 invested in a stock with a beta of 1.4. If these are the only two investments in her portfolio, what is her portfolio's beta? 8-3. Required Rate of Return Assume that the required rate of return on the market portfolio is 15% and the risk-free rate is 7%. What is the required rate of return on a stock with a beta of 1.2? 8-4. Expected and Required Rates of Return Assume that the risk-free rate is 5% and the market risk premium is 6%. What is the required return for the overall stock market? What is the required rate of return on a stock with a beta of 1.2? 8-5. Beta and Required Rate of Return The stock of Orange Inc. has a required rate of return of 14%, the required return on the market is 11%, and the risk- free rate is 5% a. What is the market risk premium? age.com/staticinbullevo index.html?deploymentid=59845623469074287062431587128e1SBN=9788000060651&Id=72306264 Print Preview b. What is the stock's beta? c. If the required return on the market increased to 12%, what would happen to the stock's required rate of return? Assume that the riskfree rate and the beta remain unchanged