Calculate the correlation coefficient between Blandy and the market, Use this and the previiously calculated standard deciation of blandy and the market to estimate blandys beta. Does blandy contribute more or less risk to a well diversified portfolio than does the average stock? Use SML to estimate blandys required return.

Part 3 Stooks and Options of return on 10-year zero coupon Treasury bonds for each scenario. The probabilities and returns are shown here a 10-Year Zero Coupon Treasury Bond during the Next Year Probability of ScenarioProbability ar Return on Scenario 0.10 0.20 0.40 0.20 0.10 -14% Worst Case Poor Case Most Likely Good Case Best Case 4% 6% 16% 26% You have also gathered historical returns for the past 10 years for Blandy, Gourmange Corporation (a producer of gourmet specialty foods), and the stock market Historicol Stock Returns Mark sonrmange car 0% 47% 1s -14 18 15 -14 28 40 17 -23 10 26 -18 42 30 -3 32 -10 38 28 75 Average return: Standard deviation: Correlation with the market: Beta: 9.2% 38.6% 0.678 1.30 8.0% 20.1% 1.00 1.00 The risk-free rate is 4% and the market risk premium is 5%. ent returns? What is the return on an investment that costs s1 0