Q1. ABC Company's stock has a beta of 1.95, the risk-free rate is 2.25%, and the market risk premium is 7.75%.What is ABC's required rate of return using CAPM?

Q2. Hazel Morrison, a mutual fund manager, has a $60 million portfolio with a beta of 1.00. The risk-free rate is 3.25%, and the market risk premium is 6.00%. Hazel expects to receive an additional $40 million, which she plans to invest in additional stocks. After investing the additional funds, she wants the fund's required and expected return to be 15%. What must the average beta of the new stocks be to achieve the target required rate of return?

Q3. Campbell's father holds just one stock, East Coast Bank (ECB), which he thinks is a very low-risk security.Campbell agrees that the stock is relatively safe, but he wants to demonstrate that his father's risk would be even lower if he were more diversified.Campbell obtained the following returns data shown for West Coast Bank (WCB).Both have had less variability than most other stocks over the past 5 years.Measured by the standard deviation of returns, by how much would his father's historical risk have been reduced if he had held a portfolio consisting of 50% ECB and the remainder in WCB?Enter your answer rounded to two decimal places.Do not enter % in the answer box.For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

Year ECB WCB

2014 20.00% 25.00%

2015 -10.00% 15.00%

2016 35.00% -5.00%

2017 -5.00% -10.00%

2018 15.00% 35.00%