Portfolio information Rate of return if state occurs Portfolio Stock K Stocks Stock U Return State of Probability of state economy occurring Boom 0.8 Bust 0.2 E(Ri) oi (variance) oi (standard deviation) Wi (portfolio weight) Bi (beta) 6.5% 19.5% 9.10% 17.9% 4.6% 15.24% 24.8% -11.0% 17.64% 15.17% 7.51% 13.64% 0.0009 3.06% 0.0027 5.20% 0.3 0.7 0.0028 5.32% 0.6 1.0 0.0205 14.32% 0.1 1.4 Expected return on the market is 12.8% and T-bills are yielding 4.4% From the above information we know that the market required return based on the systematic risk for Stock S is