Question 1: You invest in a portfolio of 5 stocks with an equal investment in each one. The betas of the 5 stocks are as follows: .8, -1.3, .95, 1.2 and 1.4. The risk-free return is 3% and the market return is 7%. A. Compute the beta of the portfolio.

B. Compute the required return of the portfolio.

Question 2: You are given the following probability distribution for a stock:

Probability Outcome

.5 -6% .5 18%