1. Use the following information to answer the questions. Security Market Risk-free Firm A Firm B Firm C Beta 1.0 0.0 1.5 ( ) 2.0 Standard deviation 10% 2) Figure out the beta for Firm B (15points) 2% 30% 20% 25% 1) Figure out the expected return for Firm A. (15points) Expected return 6.0% 2.0% ()% 7.0% ( )% 3) Compare Firm A with Firm C. i) Which firm has higher total risk? Firm A or C? ii) Which firm will have higher expected return? Firm A or C? Why? (30points) 4) You form a portfolio by investing $8,000 in the market and $2,000 in the risk-free security. Figure out both the expected return and beta for the portfolio. (30points) 5) There are three kinds of risk: total risk, systematic risk, and unsystematic risk. Which risk can be removed by forming a diversified portfolio affect? (20points) 6) Among three kinds of risk: total risk, systematic risk, and unsystematic risk, which risk determines the expected return on a stock? (20points)