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You have observed the following returns over time: Year Stock X Stock Y Market 2009 14% 13% 12% 2010 19 7 10 2011 -16 -5

You have observed the following returns over time:

Year

Stock X

Stock Y

Market

2009

14%

13%

12%

2010

19

7

10

2011

-16

-5

-12

2012

3

1

1

2013

20

11

15

Assume that the risk-free rate is 6% and the market risk premium is 5%.

a. What are the betas of Stock X and Y?

b. What are the required rates of return on Stocks X and Y?

c. What is the required rate of return on portfolio consisting of 80% of Stock X and 20% of Stock Y?

Thank you very much for your help!

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