Problem 11-1

Based on the following probability distribution, what is the security's expected return?

State Probability r___

1 0.2 -5.0%

2 0.3 10.0

3 0.5 30.0

Problem 11-3

Susan's investment portfolio currently contains three stocks that have a total value equal to $100,000. The beta of this portfolio is 1.5. Susan is considering investing an additional $50,000 in a stock that has beta equal to 3. After she adds this stock, what will be the portfolio's new beta?