1) A common application of calculating expected returns is forecasting the expected return of the stock market. For example, if you believe there is a 15% chance of a recession and a stock market return of -20% and an 85% chance of continued growth with the stock market appreciating 12%. Using this data, what is the expected return for the stock market? (remember, at least three decimal places, 0.000)

2) Walgreens sells drugs in good times and bad. You would suspect Walgreens to have a Beta ___________ than (to) one.

ABOUT EQUAL--LESS--MORE--No answer text provided.

3) Dell sells computers primarily to businesses. You would suspect Dell to have a Beta ___________ than (to) one.

MORE--LESS--ABOUT EQUAL--No answer text provided.

4) Your expectations for the Market return is 6% and the risk-free rate is 1%. If you have a stock with a Beta of 0.5, what is the expected return of your stock?

4b)What is the Market Risk premium in the problem above?

5)You own 100 shares of a $10 stock (ABC corp), 200 shares of a $20 stock (DEF corp), and 300 shares of a $30 stock (GHI corp). The beta for ABC is 1.5; for DEF 1.1 and for GHI 0.5, what is the beta for your portfolio? (hint: use the formula from the overheads to solve)

5b)If the expected return on the market is 11% and the risk free rate is 2%, what is the expected return on your portfolio above?

6)I saw on a commercial that Apple has their own credit card now. They are tapping into the banking system. It is going to make them a lot of money and we should buy the stock because of it. This idea is inconsistent with which form of the Efficient Markets Hypothesis?

Semi-Strong from--Weak form--Strong form--No answer text provided.

7)I have been watching the price charts of all the gambling stocks and they are all going WAY UP! We should buy because they are still trending higher. This idea is inconsistent with which form of the Efficient Markets Hypothesis?

Weak form--Semi-Strong from--Strong form--No answer text provided.