1. Risk and returns [10 points]

Probability	Return of Stock A (%)	Return of Stock B (%)
0.2	-10	-35
0.5	15	18
0.3	38	47

1. Calculate expected return of the portfolio with 40% investment in stock A and 60% investment in stock B.
2. Calculate CAPM returns for stock A and B given that risk-free rate is 2 percent and market return is 6 percent. Stock As beta is 0.9 and stock Bs beta is 1.5