(solve on paper)

-What is the expected market return if the expected return on asset A is 19% and the risk-free rate is 5%? Asset A has a beta of 1.4.

-Use the following to answer questions 8-10:

State Probability Return on A Return on B

Boom 0.65 0.30 0.05

Bust 0.35 0.10 0.20

-What is the expected return on security A?

-What is the expected return on a portfolio that is 30% invested in A and 70% invested in B

-What is the expected return on a portfolio that is equally weighted amongst A, B, and the risk-free asset? The risk-free rate is 5%.