Q1) There is a 33.70% probability of a below average economy and a 66.30% probability of an average economy. If there is a below average economy stocks A and B will have returns of 2.70% and 14.90%, respectively. If there is an average economy stocks A and B will have returns of 4.40% and -4.30%, respectively. Compute the: a) Expected Return for Stock A (0.75 points):

b) Expected Return for Stock B (0.75 points):

c) Standard Deviation for Stock A (0.75 points):

d) Standard Deviation for Stock B (0.75 points):

Q2) There is a 48.20% probability of an average economy and a 51.80% probability of an above average economy. You invest 25.40% of your money in Stock S and 74.60% of your money in Stock T. In an average economy the expected returns for Stock S and Stock T are 14.90% and 14.90%, respectively. In an above average economy the the expected returns for Stock S and T are 35.80% and 17.50%, respectively. What is the expected return for this two stock portfolio? (2 points)

Q3) You are invested 27.90% in growth stocks with a beta of 1.80, 16.10% in value stocks with a beta of 0.52, and 56.00% in the market portfolio. What is the beta of your portfolio? (1 point)

Q4) An analyst gathered the following information for a stock and market parameters: stock beta = 0.75; expected return on the Market = 11.20%; expected return on T-bills = 2.30%; current stock Price = $7.79; expected stock price in one year = $10.57; expected dividend payment next year = $3.19. Calculate the a) Required return for this stock (1 point):

b) Expected return for this stock (1 point):

Q5) The market risk premium for next period is 8.00% and the risk-free rate is 1.20%. Stock Z has a beta of 1.15 and an expected return of 10.30%. What is the: a) Market's reward-to-risk ratio? (1 point):

b) Stock Z's reward-to-risk ratio (1 point):