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 4. If these are the only two investments in her portfolio, what is her portfolios beta?

Assume that the risk-free rate is 5% and the market risk premium is 6%. What is the return for the overall stock market? What is the required rate of return on a stock with a beta of 2?

Stock R has a beta of 5, Stock S has a beta of 0.75, the expected rate of return on an average stock is 13%, and the risk-free rate of return is 7%. By how much does the required return on the riskier stock exceed the required return on the less risky stock?

Calculate the required rate of return for Manning Enterprises, assuming that investors expect a 3.5% rate of inflation in the future. The real risk-free rate is 2.5% and the market risk premium is 6.5%. Manning has a beta of 1.7.

1. Expected return: A stocks returns have the following distribution:

Demand for the companys products	Probability of this demand occurring	Rate of return if this demand occurs
Weak	0.1	-50%
Below average	0.2	-5%
Average	0.4	16%
Above average	0.2	25%
Strong	0.1	60%
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