I need this in 8 hours. Just attach a new file with all step by step answers plz.

MGMT 240 Corporate Finance F16 Assignment 3 (Due Date: Nov 23, 2016; Total: 10 Points) Problem 1 (5 points) You are given the following information about Stocks A and B: Rate of Return if State Occurs State of Economy Boom Normal Recession Probability of State of Economy 0.30 0.50 0.20 Stock A Stock B 22% 16% -3% 17% 7% 2% Stock A has a beta of 1.2, and Stock B has a beta of 0.7. Assume that the CAPM holds, and that neither of these stocks is over or undervalued. a. What is the market risk premium, risk-free rate, and expected return of the market portfolio? (Hint: Calculate the expected returns of the two stocks first. Then write out the CAPM equations for both of them to solve for the risk-free rate and the market risk premium.) b. What would be the beta of a portfolio consisting of 60% of Stock A and 40% of Stock B? Page 1 of 4 c. What would be the expected return of a portfolio consisting of 60% of Stock A and 40% of Stock B? Page 2 of 4 Problem 2 (2 points) A portfolio consisting of Stocks 1 and 2 has an expected return of 14%. What is the standard deviation of this portfolio given the information in Table 3.1? Table 3.1 Expected Return Standard Deviation Correlation (1,2) Stock 1 15% 12% Stock 2 10% 18% 0.5 Page 3 of 4 Problem 3 (2 points) A portfolio consisting of Stocks 3 and 4 has zero variance. What is the weight of Stock 3 in this portfolio given the information in Table 3.2? Table 3.2 Standard Deviation Correlation (3,4) Stock 3 18% Stock 4 6% -1 Problem 4 (1 point) Which of the following statements are correct? _____________________ a. In a strong-form efficient market, no one is able to earn a positive return. b. In a weak-form efficient market, all historical information should have been incorporated into stock prices. c. The disposition effect describes the phenomenon that investors are unwilling to sell assets that have increased in value. d. Overconfidence can explain the fact that investors tend to trade more frequently than they should. e. In an efficient market, some investors can still earn higher returns by taking more risk. f. Technical analysis does not generate consistent profits in a semi-strong form efficient market. Page 4 of 4