David owns a two-stock portfolio that invests in Happy Dog Soap Company (HDS) and Black Sheep Broadcasting (BSB). One-quarter of Davids portfolio value consists of HDSs shares, and the balance consists of BSBs shares. Each stocks expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table:

State of market	Probability of state	Happy Dog Soap	Black Sheep Broadcasting
Strong	0.20	22.5%	31.5%
Normal	0.35	15%	20%
Weak	0.45	-18%	-22.5%

(a) Calculate the expected returns for the individual stocks in Davids portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. (9 marks) The expected rate of return on Happy Dog Soaps stock over the next year is _________. The expected rate of return on Black Sheep Broadcastings stock over the next year is _______. The expected rate of return on Davids portfolio over the next year is ________. (b) Given that the risk-free rate is 1% and the market risk premium is 0.5%, calculate the beta for HDS and BSB shares. (5 marks) Beta for HDS stock is __________. Beta for BSB stock is __________. (c) Based on the betas found in part (b) above and the portfolio weights, calculate the beta of Davids portfolio. (1 mark) Beta for Davids portfolio is __________.