Page 1 of 11 Next Page Question 1(7 points) Consider the following information: Probability of State of economy state Boom 0.2 Normal 0.5 Recession 0.3 Return Stock Return Stock A B 15% 9% 7% 11% 3% 13% 1. What is the expected return of the portfolio made of 60% investment in Stock A and rest in Stock B? 11.5 marks) II. What is the beta of the portfolio (in part 1) if bota of Ais 0.90 and bota of B is 1.77 [1 mark] ill. If the market risk premium is expected to be 4%, what must be the risk-free rate? (1.5 marks) iv. What would be the expected return of a portfolio consisting of equal investment in Stock A, Stock B, T- Bills and S&P 500? (1.5 marks) v. What is the beta of the portfolio (in part IV)? (1.5 marks