1. It is estimated that stock A will return 10% if the economy is in the normal condition next year, and the returns will be 16% and 3% respectively if the economy is in the boom and bust conditions. The probability of the boom, normal, and bust economic conditions are estimated as 20%, 70%, and 10% respectively. What is the expected return of the stock ?

2. An investor plans to create a portfolio with stocks A, B, and C with 50%, 30% and 20% weight respectively of the three stocks. If beta of A, B, and C has beta of 1.5, 2, and 2.4 respectively. What is the portfolio beta? If the risk-free rate is 3% and the market risk premium is 6%, What is the required return of this portfolio?