Problem 1:

You invest in a portfolio of 5 stocks with an equal investment in each one. The betas of the 5 stocks are as follows: .75, -1.2, .90, 1.3, 1.5. The risk free return is 4% and the market return is 9%. (Not a multiple choice problem) A. Compute the beta of the portfolio

B. Compute the required return of the portfolio

Problem 2:

You are given the following probability distribution for a stock: (Not a multiple choice problem) Pr. Outcome.5 .4 10% .1 -6% .5 12%

A. Compute the expected return of this stock

B. Compute the standard deviation

Problem 3:

You are given the following probability distribution for a stock: (Not a multiple choice problem) Pr. Outcome.6 .4 -4% .6 12%

A. Compute the expected return

B. Compute the standard deviation

C. Presuming the stock returns are normally distributed, what do these results indicate?

Problem 4:

A stock has a beta of 0.8. The market return is 14% and the risk free return is 3%. Compute the required return for this stock.