The following represents the probability distribution for the rates of return for next month:

Probability Pfio P Market M 1/6 −20% −5%

2/6 −5% +5%

2/6 +10% 0%

1/6 +50% +10%

Compute by hand (and show your work) for all the following questions.

(a) What are the risks and rewards of P and M?

(b) What is the correlation of M and P?

(c) What is the market beta of P?

(d) If you were to hold 1/3 of your portfolio in the risk-free asset, and 2/3 in portfolio P, what would its market beta be?