Problem 1 (22 pts) Talia has $800,000. Talia formed a portfolio by investing $150,000 in stock A,$200,000 in stock B, $300,000 in stock C and $150,000 in stock D respectively. - The Market Expected return and standard deviation are as per the below: - E(rM)=12% and M=22% - The Risk-Free rate is equal to 3.25% a) What should be the expected return on stock A, and stock C? (4 pts) b) What should be the Beta of security B, and the Beta of security D? (4 pts) c) Calculate the firm specific standard deviation (e,B) for stock B, if stock B standard deviation (B) is equal to 49%, and the firm specific standard deviation (e,D) for stock D, if stock D standard deviation (D) is equal to 66%. (4 pts) d) Calculate the standard deviation (A) for stock A, and the standard deviation (C) for stock C. (4 pts) e) What should be the Beta of Talia's portfolio? ( 2 pts) f) What should be the expected return on Talia's portfolio? ( 2 pts) g) What should be the market risk of Talia's portfolio? (2 pts) Problem 2 (10 pts) Based on the below information, kindly answer the below questions: - The Market Expected return and standard deviation are as per the below: - E(rM)=12% and M=22% - The Risk-Free rate is equal to 3.25% - Stock D has a standard deviation ( D ) equal to 52%. a) A share of stock A sells for $120 today. It will pay a dividend of $5 per share at the end of the year. Investors expect the stock to sell for $150 at the end of the year. What should be Stock A beta? ( 2pts) b) Stock B sells for $77 today. It will pay a dividend of $D1 per share at the end of the year. Investors expect the stock to sell for $82 at the end of the year. What do investors expect the stock dividend to be by the end of the year? ( 2 pts) c) A share of stock C sells for $66 today. It will pay a dividend of $2.5 per share at the end of the year. Investors expect the stock to sell for $S1 at the end of the year. What do investors expect the stock to sell for at the end of the year? ( 2 pts) d) The correlation between stock D returns and the market returns is equal to 0.44. I. What should be Stock D beta? (2 pts) II. What should be Stock D expected rate of return? (2 pts)