Remember: you will be expected to show your all work. (6 points for each question)

1.

a. We expect the market portfolio to earn 12%, and T-bill yields are 4%. Lowes has a beta of 1.2. Calculate Lowes required return

b. The market risk premium is 7.2. The firms required return is 11.2%. The risk-free rate is 5%. What is the firms beta?

c. Your portfolio has a beta of 1.4. The portfolio consists of $30,000 of GM and $20,000 of Ford stock. GMs beta is 1.1. What is the beta of Ford?