Problems following distribution ne thas is co Easy Problems 1-5 (8- EXPECTED RETURN A stock's returns RATE OF retum n Rate of Retumw risky stock 8-1 CAPM AND REQ Demand Occurring Below average Average Above average Strong 8-11 CAPM AND LP%, and on, and coefficient of variation Calculate the stock's expected return, standard d 8-12 REQUIRE a. Wh b. No 8-2 PORTFOLIO BETA An individual has $20,000 invested in a stock with a beta of another $75,000 invested in a stock with a beta of 2.5. If these are the onlyt in her portfolio, what is her portfolio's beta? REQUIRED RATE OF RETURN on the market is 12% what is the required rate of return on a stock with a beta o 2? 8-3 Assume that the risk-free rate is 55% and the r required 84 EXPECTED AND REQUIRED RATES OF RETURN Assume the market risk premium is 4%. What is the required return fo Wha that the risk-free rate is 3.5% and the overall stock market Problems 13-21 t is the required rate of return on a stock with a beta of 0.82 BETA AND REQUIRED RATE OF RETURN A stock has a equired 8-5 return of 9%, the risk-free rate is 4.5%, and the market risk premium is 396. a. What is the stock's beta? b. If the market risk prenium increased to 59, what would happen to the stock's rate of return? Assume that the risk-free rate and the beta remain unchanged. Intermediate 8-6 EXPECTED RETURNS Stocks A and B have the following probability distributions of Problems 6-12 expected future returns: Probability 0.1 0.2 0.4 (10%) (35%) 12 20