1. Given the following probability distribution and stock return information:

Economy State	Probability (p)	Stock A Return	Stock B Return
Good	0.3	15%	10%
Normal	0.6	5%	8%
Bad	0.1	-3%	-20%

A) Calculate expected return rates E(r) for stock A and stock B;

B) Calculate standard deviations for stock A and stock B;

C) Calculate the coefficients of variation for stock A and stock B;

D) If risk free rate is 2%, calculate the Sharpe Ratios for stock A and stock B.

E) What stock is a better investment opportunity?

2. If you have $10,000 to invest and you put $4,000 in stock A and $6,000 in stock B (the two stocks listed in Question 1), then what is the expected return rate of your portfolio (entire investment of $10,000)?.

3. The risk free rate is 2%. The expected return rate of the market portfolio is 8%. If stock C has a beta 1.5 and stock D has a beta 0.8, what are the expected return rates of stock C and stock D?