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Q1) There is a 40.10% probability of a below average economy and a 59.90% probability of an average economy. If there is a below average economy stocks A and B will have returns of 3.10% and 5.40%, respectively. If there is an average economy stocks A and B will have returns of 12.20% and 1.70%, respectively. Compute the: a) Expected Return for Stock A ( 0.75 points): b) Expected Return for Stock B ( 0.75 points): c) Standard Deviation for Stock A ( 0.75 points): d) Standard Deviation for Stock B ( 0.75 points): Q2) There is a 15.30% probability of an average economy and a 84.70% probability of an above average economy. You invest 47.00% of your money in Stock S and 53.00% of your money in Stock T. In an average economy the expected returns for Stock S and Stock T are 12.60% and 10.90%, respectively. In an above average economy the the expected returns for Stock S and T are 13.40% and 23.60%, respectively. What is the expected return for this two stock portfolio? (2 points) Q3) You are invested 36.10% in growth stocks with a beta of 1.53,35.00% in value stocks with a beta of 0.89, and 28.90% in the market portfolio. What is the beta of your portfolio? (1 point) Q4) An analyst gathered the following information for a stock and market parameters: stock beta =0.70; expected return on the Market =10.90%; expected return on T-bills =4.10%; current stock Price =$8.08; expected stock price in one year =$8.83; expected dividend payment next year = \$4.82. Calculate the a) Required return for this stock ( 1 point): b) Expected return for this stock (1 point): Q5) The market risk premium for next period is 8.30% and the risk-free rate is 1.00%. Stock Z has a beta of 0.68 and an expected return of 11.30%. What is the: a) Market's reward-to-risk ratio? (1 point): b) Stock Z's reward-to-risk ratio (1 point)

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