Mini-Case Risk, Return, and the Capital Asset Pricing Model On your first day as an intern at Tri-Star Management Incor- 5% over the next year. Also, information from an investment porated the CEO asks you to analyze the following infor- advising service lists the current beta for Tech.com as 1.68 mation pertaining to two common stock investments, Tech. and for Sam's Grocery as 0.52. You are provided a series of com Incorporated and Sam's Grocery Corporation. You are questions to guide your analysis. told that a one-year Treasury Bill will have a rate of return of Estimated Rate of Return Economy S&P 500 Recession Average Expansion Boom Probability 30% 20% 35% 15% Tech.com -- 20% 15% 30% 50% Sarn's Grocery 5% 6% 8% 10% -4% 11% 17% 27% Continue Assignment Using the probabilistic approach, calculate the expected 5. If you form a two-stock portfolio by investing $30,000 rate of return for Tech.com Incorporated, Sam's in Tech.com Incorporated and $70,000 in Sam's Grocery Corporation, and the S&P 500 Index Grocery Corporation, what is the portfolio beta and 2 Calculate the standard deviations of the estimated rates expected rate of return? of return for Tech.com Incorporated, Sam's Grocery 6. If you form a two-stock portfolio by investing $70,000 Corporation, and the S&P 500 Index. in Tech.com Incorporated and $30,000 in Sam's 3. Which is a better measure of risk for the common Grocery Corporation, what is the portfolio beta and stock of Tech.com Incorporated and Sam's Grocery expected rate of retur? Corporation-the standard deviation you calculated in 7. Which of these two-stock portfolios do you Question 2 or the beta? prefer? Why? 4. Based on the beta provided, what is the expected rate of retum for Tech.com Incorporated and Sam's Grocery Corporation for the next year