Suppose that the risk-free rate is 6% and that the market risk premium is 8%. Round your answers to one decimal place.

1. What is the required return on the market?

   %

2. What is the required return on a stock with a beta of 0.7?

   %

3. What is the required return on a stock with a beta of 1.0?.

   %

Expected Return: Discrete Distribution

A stock's return has the following distribution:

Demand for the Company's Products	Probability of This Demand Occurring			Rate of Return if This Demand Occurs (%)
Weak		0.1		-20	%
Below average		0.2		-9
Average		0.4		17
Above average		0.2		30
Strong		0.1		75
		1.0

Calculate the stocks expected return and standard deviation. Do not round intermediate calculations. Round your answers to two decimal places.

Expected return: %

Standard deviation: %

Expected Returns: Discrete Distribution

The market and Stock J have the following probability distributions:

Probability	rM		rJ
0.3	14	%	22	%
0.4	10		7
0.3	20		11

1. Calculate the expected rates of return for the market and Stock J. Round your answers to one decimal place.

   Expected rate of return (Market): %

   Expected rate of return (Stock J): %

2. Calculate the standard deviations for the market and Stock J. Do not round intermediate calculations. Round your answers to two decimal places.

   Standard deviation (Market): %

   Standard deviation (Stock J): %