Consider following information:

	Probability of the state of economy	Rate of return if state occurs
		Stock 1	Stock 2
Recession	0.2	3 %	2 %
Boom	0.8	10 %	8 %

1) Calculate the expected return of Stock 1. Express your answer as %.

2) Calculate the standard deviation of Stock 1. Express your answer as %.

3) Calculate the expected return of a Portfolio1 invested 40% in Stock 1 and 60% in Stock 2. Express your answer as %.

4) Based on CAPM calculate Stock 1 beta if risk-free asset expected return is 2% and market risk premium is 5%.

5) Calculate the beta of the Portfolio1 consisting 40% of Stock 1 and 60% of Stock 2.