1. Assume there are only two possible market outcomes, G(good) and B("bad"), with an equal probability of 50%. The market return is equal to 16% in the good state and 0% in the bad state.
   1. Compute the expected return and the standard deviation of the market.
   2. Asset A offers a return of 20% in the good state and 0% in the bad state. Compute asset As expected return and covariance with the market return.
   3. What is the implied beta for asset A?
   4. Assume the risk-free rate is equal to 2%. Is the implied beta consistent with the CAPM?
   5. Assets with a negative beta have negative expected returns. True or False?
   6. Assets with a positive beta have a positive correlation with the market portfolio. True or False?