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 premium is 5%

A. What are the betas of stocks 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 a portfolio consisting of 8% of Stock X and 20% of stock Y?

YOU MUST SHOW DETAILED WORK AND FORMULAS TO SUPPORT ANSWER