Please see attachment for this questiom. Over the past 4 years, large-company stocks and U.S. Treasury bills have produced the returns stated below. Given this information,

1. What are the average rates of return on large-company stocks and Treasury bills?
2. What are the standard deviation for large-company stocks and Treasury bills?

2.The risk-free rate is 3.5 percent and the expected return on the market is 11 percent. Stock A has a beta of 1.1 and a return of 12 percent. Stock B has a beta of .92 and a return of 10.25 percent. Are these stocks correctly priced? Why or why not?

3. A portfolio is invested 40 percent in stock A, 30 percent in stock B, and 30 percent in stock C. What is the expected return and standard deviation of this portfolio?

State ofProbability ofRate of Return if State Occurs

EconomyState of EconomyStock AStock BStock C

Boom.10.05.16.23

Normal.70.08.09.11

Recession.20.15-.03-.25