1. Use the following information to answer the questions.

Security	Beta	Standard Deviation	Expected return
S&P 500 Risk-free security Stock D Stock E Stock F	1.0 0.0 ( ) 0.8 1.2	20% 0% 30% 15% 25%	10.0% 4.0% 13.0% ( )% ( )%

1. Figure out the market risk premium using both S&P 500 and the risk-free security. (20points)
2. Figure out the beta for Stock D and the expected return for Stock E using the CAPM equation. (30points)
3. i) Figure out the expected return for Stock F based on the CAPM equation and the beta of 1.2. ii) If Stock F has an average return of 16%, figure out the abnormal return, alpha (?), for Stock F. (30points)
4. Suppose that you form a portfolio with two stocks E and F along with the S&P portfolio. When their weights are 0.3, 0.5, and 0.2 respectively, figure out the beta of your portfolio. (20points)