1. Considering the world economic outlook for the coming year and estimates of sales and earnings for the pharmaceutical industry, you expect the rate of return for Lauren Labs common stock to range between -20 percent and +40 percent with the following probabilities.

Probability Possible Returns

0.10 -0.20

0.15 -0.05

0.20 0.10

0.25 0.15

0.20 0.20

0.10 0.40

Compute the expected rate of return E(Ri) for Lauren Labs

2. Given the following market values of stocks in your portfolio and their expected rates of return, what is the expected rate of return for your common stock portfolio?

Stock Market Value in ($Mil.) E(Ri)

Disney $15,000 0.14

Starbucks 17,000 -0.04

Harley Davison 32,000 0.18

Intel 23,000 0.16

Walgreens 7,000 0.12