Who can ask 17th and 18th questions.

17. Based on the table below State of Economy Probability T-Bills High Tech CollectionsJ.S.Rubber Market 2 Recession 0.2 0.6 0.2 2290 8%- -13% 15% 8% 8% 8% 8% 10% Average Boom 7% 30% 12,2% 9,0% 0,36 20% 50% 0% -20% 1.6% 15.3% 0,86 Er 0 1 5% 17,7% 1,00 a) b) c) Calculate the expected rate of return on each alternative. Calculate the standard deviation of returns, and the coefficient of variation for each alternative. Suppose you create a two-stock portfolio by investing $70,000 in high tech and $30,000 in collections. Calculate the expected rate of return, the standard deviation, the coefficient of variation, the correlation coefficient, and the covariance for the portfolio. Calculate the covariance and the correlation coefficient between the high tech company and the market. Determine betas for high tech, and the above-mentioned, two-stock portfolio. d) e) How do the expected rates of return compare with the required rates of returns? Are the stocks under- or overvalued? Illustrate the security market line (SML) 18. The stock return has a yearly standard deviation of 9%; that of the market is 17.7%. The shareholders e cormpany as an opportunity cost. The T-bill is expected to earn 5%, and the S&P500 Index promises 12% market return for the investors. How much is the market risk premiu require 7.52% return on their investments in th m and the corporate risk premium? Determine the correlation coefficient between the stock and the market index