Question 1 (7 points) Consider the following information: Probability of State of economy state Boom Normal 0.5 Recession 0.2 Return Stock 15% 7% 3% Return Stock B 9% 11% 13% 0.3 i. What is the expected return of the portfolio made of 60% investment in Stock A and rest in Stock B? (1.5 marks] ii. What is the beta of the portfolio (in part i) if beta of A is 0.90 and beta of Bis 1.7? [1 mark] iii. If the market risk premium is expected to be 4.25%, what must be the risk-free rate? [1.5 marks] iv. What would be the expected return of a portfolio consisting of equal investment in Stock A, Stock B, T-Bills and S&P 500? (1.5 marks] v. What is the beta of the portfolio (in part iv)? [1.5 marks]