a. Calculate the standard deviation of the following returns.

Year Return

1 -0.05

2 0.16

3 0.03

4 -0.11

5 0.21

Enter the answer with 4 decimals, e.g. 0.1234.

b. A stock has an expected return of 0.11, its beta is 0.51, and the expected return on the market is 0.09. What must the risk-free rate be? (Hint: Use CAPM) Enter the answer in 4 decimals e.g. 0.0123.

c. You own a portfolio equally invested in a risk-free asset and two stocks (If one of the stocks has a beta of 0.76 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? (Hint: Remember that the market has a Beta=1; also remember that equally invested means that each asset has the same weight- since there are 3 assets, each asset's weight is 1/3 or 0.3333. Use 0.333333, and not only 0.33, sorry, calculation is sensitive to it). Enter the answer with 4 decimals (e.g. 1.1234)