a) What is the definition of systematic risk? (3p) b) Can you give an example of a possible reason for systematic risk? (3p) Bruno's stock should return 11 percent in a boom, 10 percent in a normal economy, and 9 percent in a recession. The probabilities of a boom, normal economy, and recession are 20 percent, 50 percent, and 30 percent, respectively. What is the variance of the returns on this stock? (3p) c) The risk-free rate is 2 percent and the expected return on the market is 9 percent. Stock A has a beta of 1.1 and an expected return of 14.9 percent. Stock B has a beta of.80 and an expected return of 7.4 percent. Are these stocks correctly priced? Please explain your answer in 3 or 4 sentences. (3p) d) e) You own a stock portfolio invested 25 percent in stock Q, 25 percent in stock R, 35 percent in stock S and 15 percent in stock T. The betas for these four stocks are 0.85, 0.91, 1.45 and 1 respectively. What is the portfolio beta? (6p)